Wiki Investment

Thailand

7 Chapter Tax

7.1 Tax of Thailand

Tax for making inroads into foreign markets

■Regulations of tax when make inroads into foreign market (Thailand)

With or without branch in Thailand have to follow that a foreign company carrying on business in Thailand, whether it has a branch, an office, an employee or an agent in Thailand shall pay 30 % tax (reduced to 20% until 2015) only on profit deriving from business in Thailand. However, international transportation company shall pay tax at the rate of 3% on gross receipts.

■ Verification of methods of return of investment

Return of investment to parent company have to prepare support documents and deduct withholding tax by rate below

- Dividend deduct withholding tax rate 10.0 %

- Interest of loan withholding tax rate 15.0 %

*** No any preferential tax for refund investment ***
Several regulations of international tax system

■Tax treaty

● Tax on Permanent establishment

a) In case of company owned the PE have to pay annual property tax at rate 12.5% of estimated rental fee per year.

b) In case of company rent the PE will depends on lease agreement that lessor or lessee will pay annual property tax.

● Tax on royalties for Japan is 15 % for all royalties (for other countries please see source http://www.rd.go.th/publish/29163.0.html)

● Income of employees who sojourn

Expense for living accommodation for example , monthly apartment, house rental have to include in employee’s income but for expense that employee’s travel and accommodation occasionally don’t have to include to employee’s income.

● Tax on director’s remuneration and Agreement between countries on double taxation agreement.

If the company’s director is foreigner have to follow the double tax agreement (DTA) below.

●Introduction to Double Tax Agreement (DTA)

Thailand first concluded the double tax agreement (DTA) with Sweden in 1963. The Thai DTA network continues to be expanded and updated.

So far Thailand has concluded DTAs with 56 countries (as of May2006). In general a DTA comprises 4 major parts:

A. Scope

(1) Persons Covered

The DTA applies to persons who are residents of the Contracting States. In order to be classified as a Thai resident and be entitled to treaty benefits, a person must be one of the following:

- An individual who stays in Thailand for a period or periods exceeding in the aggregate 180 days in a tax year;

- A juristic person who is incorporated under the Civil and Commercial Code of Thailand.

(2) Taxes Covered

The DTA applies to only income taxes, namely personal income tax, corporate income tax and petroleum income tax. Other indirect taxes such as value added tax and specific business tax are not covered by the DTA.

B. Types of income

In general the DTA does not stipulate any specific item of income and tax rate. It provides whether the source or resident country is entitled to tax certain income. If the source country has taxing rights, the income will be subject to tax according to the domestic laws of that country.

The DTA also prescribes a tax rate level on investment income; namely, dividends, interest and royalties. Then the source country can tax such income at a rate not exceeding the rate prescribed within the agreement. In many cases the tax rates within the DTA are lower in comparison to the domestic tax rates in order to reduce tax impediments to cross border trade and investment.

Some Articles of the DTA clearly do not allow the source country to exercise taxing rights on income such as income from international air transport and business profits provided that the business is not carried through a permanent establishment in the source country.

C. Elimination of double taxation

The focus of a DTA is the elimination of double taxation. Each DTA may prescribe different methods of elimination of double taxation of a person by the resident country:

(1) Exemption method

The country of residence does not tax the income which according to the DTA is taxed in the source country.

(2) Credit method

The resident country retains the right to tax the income which was already taxed in the source country. It calculates its tax on the basis of the taxpayer's total income including income from the other country which according to the DTA is taxed in that other country. However, it allows a deduction from its own tax for the tax paid in the other country. Where a DTA does not exist with a particular country, there are provisions within the Royal Decree No. 300 which allow unilateral credit relief against Thai tax for tax paid in the other country by a Thai juristic person.

D. General provisions

The last part of the double tax agreement provides administrative assistance such as exchange of information between tax administrations and dispute resolution procedures.

Countries listed of double tax agreement (DTA)
Tax on PE

Tax on permanent establishment (PE) is a taxation based on fixed place of business which generally gives rise to income or value-added tax liability in a particular jurisdiction. The term is defined in many income tax treaties. The tax systems in some civil-law countries impose income taxes and value-added taxes only where an enterprise maintains a PE in the country concerned. Definitions of PEs under tax law or tax treaty may contain specific inclusions or exclusions.

The term "permanent establishment" includes especially:

(a)        a place of management,

(b)        a branch;

(c)        an office;

(d)        a factory;

(e)        a workshop;

(f)         a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;

(g)        a farm or plantation; and

(h)        a warehouse in relation to a person providing storage facilities for others.

●When Japanese companies do business through Thailand office/offering the service

The Japanese need to consider both of Thailand’s internal law and double taxation agreement. In addition, Japanese need to consider that whether a company chooses to register under Thai law for getting the various tax benefit and consider double taxation agreement that concern about the permanent establish in Thailand and the type of revenue as follow;

a)      Income derived by a resident of a Contracting State from immovable property situated in the other Contracting State may be taxed in that other Contracting State.

b)     The income or profits of an enterprise of a Contracting State shall be taxable only in that Contracting State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the income or profits of the enterprise may be taxed in that other Contracting State but only so much of them as is attributable to that permanent establishment.

c)      Income or profits derived by an enterprise of a Contracting State from the operation of aircraft in international traffic shall be taxable only in that Contracting State. Income or profits derived by an enterprise of a Contracting State from the operation of ships in international traffic may be taxed in the other Contracting State, but the tax so charged in that other Contracting State shall be reduced by an amount equal to 50 per cent thereof.

d)     Where

-          an enterprise of a Contracting State participates directly or

                               indirectly in the management, control or capital of an

                                     enterprise of the other Contracting State, or

-          the same persons participate directly or indirectly in the

                         management, control or capital of an enterprise of

                         aContracting State and an enterprise of the other Contracting

                         State, and in either case conditions are made or imposed

                         between the two enterprises in their commercial or financial

                         relations which differ from those which would be made

                         between independent enterprises, then any income or

                         profits which would, but for those conditions, have accrued to

                         one of the enterprises, but, by reason of those conditions,

                         have not so accrued, may be included in the income or

                         profits of that enterprise and taxed accordingly.

e)      Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other Contracting State.

However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the dividends and is a company which owns at least 25 per cent of the voting shares of the company paying the dividends during the period of six months immediately before the end of the accounting period for which the distribution of profits takes place, the tax so charged shall not exceed:

-          15 per cent of the gross amount of the dividends in the case

                          of the dividends paid by a company engaged in an industrial

                          undertaking; or

-          20 per cent of the gross amount of the dividends in other cases.

● When do business through deputy

According to Section 76 bis of the Revenue Code for the issue of Thailand's PE tax law that describe as follows:

“If a juristic company or partnership incorporated under a foreign law has an employee, a representative or a go-between in Thailand for the purpose of carrying on business in Thailand and derives income or gains in Thailand, such juristic company or partnership is deemed to be carrying on business in Thailand, and such employee, representative or go-between, whether a natural person or a juristic person, is, in so far as the said income or gains are concerned, deemed to be an agent of the said juristic company or partnership and has the duty and liability to file the tax returns and to pay the tax under the provisions of this Division.”

Accordingly, in the case where a foreign company: Has an employee, representative or a go-between in Thailand for carrying on business in Thailand; and Derives income or gains in Thailand; Then: The foreign company is “deemed” to be carrying on business in Thailand; The employee, representative or go-between in Thailand is “deemed” to be the agent of the foreign company; and The employee, representative or go-between in Thailand “has the duty and liability” to file a tax return and pay the tax on the income or gains derived by the foreign company in Thailand.

The tax return that is to be filed and the tax that is to be paid by the employee, representative or go-between in Thailand is a corporate income tax return and corporate income tax (at the standard rate of corporate income tax) on the amount of the income or gains after deduction of expenses that is derived by the foreign company in Thailand. But in the case where the employee, representative or go-between in Thailand doesn't file a tax return and pay the tax, and the Thailand Revenue audit officers discover the existence of the PE, the second paragraph of the Section 76 bis law prescribes the tax that the Revenue audit officers are able to impose, as follows:

“If the person having the duty and liability to file tax returns and pay tax under paragraph one is unable to ascertain the net profit of the business carried on in Thailand the method of assessment under Section 71(1) shall apply mutatis mutandis.”

The method of assessment under Section 71(1) is 5% tax on the aggregate of either gross receipts or gross sales for an accounting period before deduction of expenses, and if such aggregate cannot be ascertained, 5% tax on a corresponding aggregate for any previous accounting period, and if such corresponding aggregate for any previous accounting period cannot be ascertained, any tax amount that a Revenue officer may deem proper.

● Method of taxation in PE in Thailand

A company or juristic partnership incorporated under Thai laws or incorporated under foreign laws and carrying on business in Thailand shall pay tax in accordance with the provisions in this Part. A company or juristic partnership incorporated under foreign laws and carrying on business in other places including Thailand shall pay tax on the net profits from the business or related to the business carried on in Thailand in an accounting period and the calculation shall follow Section 65 and 65 Bis of The Revenue Code. However, if the above net profits cannot be calculated, the provisions regarding the assessment of taxes under Section 71 (1) of The Revenue Code shall be applied mutatis mutandis.

Taxable income shall calculate based on net profit which deducte income from business or income arising from business carried on in an accounting period with expenses in accordance with conditions prescribed in Section 65 Bis and Section 65 Ter. An accounting period shall be twelve months except in the following cases where it may be less than twelve months:

Deduction of foreign taxation

In Thailand, there are many kinds of business identities. The type of business you chose will affect your tax rates and tax benefits.

In general, the most common types of Foreign company are:

- A company carrying on business in Thailand but registered under foreign

law.

- A company not carrying on business in Thailand but deriving income from

Thailand.

A foreign company carrying on business in Thailand, whether it has a branch, an office, an employee or an agent in Thailand shall pay 30% tax (reduced to 20% until 2015) only on profit deriving from business in Thailand. However, international transportation company shall pay tax at the rate of 3% on gross receipts.

A foreign company that does not carry on business in Thailand will be subject to withholding tax on certain categories of income derived from Thailand. The withholding tax rates may be further reduced or exempted depending on types of income under the provision of Double Taxation Agreement Rates (Thailand has concluded 57 tax treaty agreements*):

Remittance of profits	10%
Dividends	10%
Other income such as interests, royalties, capital gains, rents and professional fees	15%

* Armenia, Australia, Austria, Bangladesh, Bahrain, Belgium, Bulgaria, Canada, China P.R., Cyprus, Czech Republic, Denmark, Finland, France, Germany, Hong Kong, Hungary, India, Indonesia, Israel, Italy, Japan, Korea, Laos, Luxembourg, Malaysia, Mauritius, Nepal, the Netherlands, New Zealand, Norway, Oman, Pakistan, the Philippines, Poland, Romania, Seychelles, Singapore, Slovenia, South Africa, Spain, Srilanka, Sweden, Switzerland, Turkey, Ukraine, United Arab Emirates, United Kingdom of Great Britain and Northern Ireland, United States of America, Uzbekistan, Vietnam, Kuwait, Russia, Chile, Burma, Taiwan, and Estonia.

A company that chooses to register under Thai law shall enjoy various tax benefit schemes such as;

	-	- Income tax holiday from 3 to 8 years for business with Investment Promotion Privileges.
	-	-Reduction or exemption of import duties on raw material and imported machinery for business with Investment Promotion Privileges or industries setting up in Export Processing Zone and Free Trade Zone.
	-	-Double deduction for the cost of transportation, electricity and water supply for industries with Investment Promotion Priviledges.
	-	-200% deduction for the cost of hiring qualified researchers doing research and development project.
	-	-150% deduction for the cost of employee’s training in order to improve human capital.
	-	-Small and medium size company can choose to deduct special initial allowance on the date of acquisition for computer (40%), plant (25%) and machinery (40%).

Transfer pricing taxation

■Overview of transfer pricing taxation in Thailand

Overview of Transfer Pricing in Thailand Tax authorities around the world are spending more time focusing on transfer pricing. They are concerned with whether taxpayers transfer some profits from high tax rate jurisdictions to low tax rate jurisdictions through transfer prices. In Thailand, transfer pricing has increasingly come under the Thai Revenue Department (“TRD”)’s scrutiny. General provisions in the Thai Revenue Code allow for tax officers to make adjustments to assessable income and allowable deductions of a taxpayer if the taxpayer has dealt with related parties in a manner inconsistent with arm’s-length principles. The TRD makes adjustments when the compensation received by the taxpayer is less than the market price or if the expenses paid are higher than the market price. The TRD adjustments result in additional tax payable together with a surcharge and penalties.

International business transactions have increased dramatically over the years. Investment has increasingly expanded at an unprecedented rate in many countries. These international business activities have led to the formation of a group of companies with mutual interests which is known as “multinational enterprise” (MNE). Companies within the MNE may trade goods or services with one another by means of    “Transfer Pricing”. The Revenue Department is aware of practical problems in calculating the market price. Therefore, the booklet “Determination of Market Price for Multinational Enterprises” is accordingly written to provide businesses with guidelines in determining acceptable market prices in accordance with international principles. The preparation of adequate documentation will save time and reduce the burden of proof on the market price to the Revenue Department.



Transfer pricing has increasingly come under Thai Revenue Department officer scrutiny. Possible red flags that may lead the Thai Revenue Department to initiate a transfer pricing examination are summarized in the figure below:

Multinational Enterprises and Transfer Pricing

International business transactions have increased dramatically over the years. Investment has increasingly expanded at an unprecedented rate in many countries. These international business activities have led to the formation of a group of companies with mutual interests which is known as “multinational enterprise” (MNE). Companies within the MNE may trade goods or services with one another by means of   “Transfer Pricing”.

- Transfer Pricing is the price set between related contracting parties for goods or services which may deviate from the market price.

-  What is a Market Price or Arm’s Length Price?

A market price or arm’s length price is the price of consideration, service fee, or interest which independent contracting parties acting in good faith would charge in a commercial manner for the same characteristics, categories or types of property, service or loan that are transferred or provided on the date of the transfer of property, provision of service, or lending of fund.

Tax Legislation on Transfer Pricing

In order to prevent the evasion of taxation caused by manipulated transfer pricing within the MNEs, tax authorities can price goods and services by applying the provisions of Section 65 bis (4) (7), Section 65 ter, and Section 70 ter under the Revenue Code, Double Tax Agreements between Thailand and other countries, as well as Standard Accounting No. 37 and 47. Moreover, the Revenue Department recently issued Departmental Instruction No. Paw 113/2545, - Subject : Corporate Income Tax - The Determination of Transfer Price based on the Market Price, in order to provide tax officials with a standardized guideline on how to determine the transfer price based on the market price.

Process in Establishing the Market Price

Taxpayers are advised to apply four steps to implement a process for setting the market price. The four steps link the arm’s length principle, questions of comparability and the transfer pricing methodologies into a process that takes into account of the facts and circumstances of the taxpayers and assists in the collection and analysis of information as well as the documentation of the results and process of each step.

Note

                        1.       The four steps are not prescriptive and are not mandatory to taxpayers. The most important thing is that the taxpayer should conduct transaction leading to a market price that is appropriate and reasonable and takes into account the facts and circumstances of the case.

                        2.       In collecting and analysing information, there should be sufficient, detailed information in determining the market price. The information depends on the size of the business and the complexities of the transaction.

                        3.       The proper application by the taxpayer of the four steps to the facts and circumstances of the case should normally be sufficient to establish the market price.

                        4.       A person with knowledge on information used to determine the market price may not necessarily be from the finance or accounting department/section of the company.

                        5.       Most of the information may already be contained in existing business documents such as market reports and information, business plans and budgets. Thus, the juristic corporation or partnership is well advised to systematically gather the existing documentation. It is not necessary for the taxpayer to produce new documentation.

■ Methods to calculate price between independent enterprises

The transfer pricing methodologies which are accepted internationally are

as follows :

●Comparable Uncontrolled Price Method (CUP Method) - By comparing to the price charged in a commercial manner for consideration, provision of service, or interest between independent contracting parties where the same categories and types of property are transferred, or of service or loan are provided under the same or similar conditions.

●Resale Price Method (RP Method) - By taking into account the consideration for the transfer of property or service fee where the purchaser of goods or service resells to other persons who are independent contracting parties and deducting it with an appropriate gross profit.

Appropriate gross profit shall be calculated by multiplying the above resale price of the property or service by the gross profit margin derived from the transfer of the same characteristics, categories or types of property or service to independent contracting parties.

Example

Company G sells goods to Company A, an associated company, at the price of 50 Baht. Company A then resells such goods to Company B, an independent contracting party, at the price of 90 Baht. Assume that the gross profit margin arising from the sale to independent contracting parties within the market selling the same goods is 20 per cent of resale price.

The market price at which Company G sells goods to Company A is calculated as follows :

Resale price to an independent contracting party      =                 90 Baht

Less Gross profit (90 x 20%) 　 =                18 Baht

Market price =                 72 Baht

● Cost Plus Method (CP Method) - By taking into account the cost of property or service, which is sold to the purchaser of goods or service and marking it up with an appropriate gross profit. Appropriate gross profit shall be calculated by multiplying the above cost of property or service with the gross profit margin derived from the transfer of the same characteristics, categories or types of property or service to independent contracting parties.



Example

Company G sells goods to Company A, an associated company, at the price of 75 Baht. The cost of goods sold is 50 Baht. Company K sells the same goods to Company B, an independent contracting party, at the price of 100 Baht. The cost of goods sold is 60 Baht. Therefore, gross profit margin arising from the sale to independent contracting parties is 40 per cent of the selling price, or 66.67 per cent of cost of goods sold (40/60).



The market price at which Company G sells goods to Company A is calculated as follows :

Cost of goods sold to associated company                           =                50 Baht

Plus Gross Profit (50 x 66.67%)                                                    =                33.34 Baht

Market price                                                                                        =                 83.34 Baht

●Other Methods - If methods (1), (2) and (3) cannot be applied in calculating revenue or expenses in order to derive the market price of consideration, service fee or interest, other methods that are internationally accepted and are commercially appropriate to the facts and circumstances in respect of the transfer of property, provision of service, or lending of fund may also be applied.

■ Duty of documentation

Taxpayers are well advised to prepare contemporaneous documentation indicating steps and rationale in determining the market price during each stage of a transaction, and retain them at their office.

The list of documentation which should be prepared and kept is as follows:

1. Documentation indicating the structure and relationship between business entities within the same group, including the structure and nature of business carried on by each entity;

2. Budgets, business plans and financial projections;

3. Documentation indicating taxpayers’ business strategies as well as the reasons for adopting such strategies;

4. Documentation indicating sales and operating results and the nature of its transactions with business entities within the same group;

5. Documentation indicating the reasons for entering into international transactions with business entities within the same group;

6. Pricing policies, product profitability, relevant market information and profit sharing of each business entity. Consideration should be given to functions performed, asset utilized and risks assumed of the related business entities;

7. Documentation supporting selection of a particular pricing method;

8. Where several methods are considered, documentation indicating details of the methods apart from the method stated in 7 and the reasons for rejection of these methods. These documents should be created at the same time the decision is made to select the method in 7;

9. Documentation used as evidence indicating the negotiation positions taken by the taxpayer in relation to the transaction with business entities within the same group and the basis for those negotiating positions;

10. Other related documentation in determining the transfer price (if any).

Note:    This translation is for those who are not familiar with the Thai language. The Thai text is an official text.

■ Investigation of transfer pricing in Thailand

The Thai Revenue Department Conduct Transfer Pricing Audits by commences a transfer pricing audit with a desktop review to initially assess which taxpayers have transfer pricing risks. Once the TRD identifies transfer pricing audit targets, the TRD normally issues the following to those taxpayers:

• A transfer pricing questionnaire asking for the details of related-party transactions; and/or

• A letter requesting 10 documents, as described under Clause 4 of Paw 113/2545. These 10 documents are normally known as transfer pricing documentation.

A summary of the transfer pricing audit process is as shown:

Limitation of Transfer Pricing Assessment Transfer pricing assessments follow the statute of limitations on income tax return audits, which is five years from the due date of the tax return or five years from the filing date if there is a failure to file by the due date.

● Penalty on correction and additional payment

Penalties and Surcharge Transfer pricing audits can result in very significant assessments and income adjustments. If the adjustment results in additional tax, a surcharge of 1.5 percent per month of additional tax payable up to the amount of tax plus penalties up to 100 percent of additional tax payable will be imposed.

■ Advance price agreement

1.     Advance Pricing Arrangement Advance Pricing Arrangement (hereinafter referred as ‘APA’) is an arrangement made between the taxpayer and the tax authority, providing transfer pricing issues for intra-group of companies’ transactions for a certain period in advance with appropriate methodologies, terms, as well as conditions.

2. Objective of APA To avoid any potential disputes, or problems of double taxation caused by transfer pricing re-assessment, the taxpayer may apply for Bilateral APA in order to - ensure APA is consistent with the Revenue Code - avoid, and eliminate, double taxation according to Double Tax Agreements (DTAs) signed between Thailand and other jurisdictions. - prevent tax avoidance and evasion - enhance knowledge and understanding between the taxpayer and the tax authority. - indicate certain tax liabilities

3. Filing APA application A company or juristic partnership incorporated under Thai law, who enters into intra-group transactions with affiliates who are residents of Thailand’s treaty partners, may submit a written document of intent (APA proposal) directly to the DirectorGeneral of the Revenue Department. In this case, only Bilateral APA will be accepted. If necessary, taxpayers may provide foreign languages’ translators, or specialists in relation to APA.

4. APA period APA generally becomes effective between 3 to 5 accounting periods. Notably, the last day of the first accounting period must be within or after the date of the submission of APA application.
Process of APA application

■Pre-filing Meeting

(1) Objective of Pre-filing Meeting - to discuss the reason for APA application - to submit important Pre-filing documents according to 5.3 (1)-(6) - to discuss about related documents attached to APA application - to indicate the date of APA application - to minimize the time taken for process of consideration

(2) Pre-filing Meeting Application Taxpayer who wishes to apply for APA must submit a written document of intent (Pre-filing Meeting) to the Director-General of the Revenue Department at least 6 months prior to the last day of the first accounting period that APA aims to become effective. Taxpayer must submit important Pre-filing documents according to 5.3 (1)-(6) 15 days prior to Pre-filing Meeting.

In case of reasonable cause, however, late submission may be taken into consideration.

Example: If a taxpayer wishes to apply APA for accounting period ending 31 December 2010-2012, Pre-filing Meeting application must be submitted before 30 June 2010. It should be noted that Pre-filing Meeting is not legal binding for all APA parties.

■APA Application In order to apply APA, taxpayers shall submit a written document of intent according to the form set out by the Revenue Department, as well as other required documents according to 5.3 to the Director-General of the Revenue Department prior to or within the last day of the first accounting period of APA submission. Five copies of all related documents shall be submitted in both languages, i.e. Thai and English. One soft file is also required, e.g. CD rom. Example: If a corporate taxpayer, having accounting period starting 1 January to 31 December, intends to apply APA for accounting period ending 31 December 2010-2012, APA application should be submitted before or within 31 December 2010.

■ Preparation of Required Documents and Evidences for APA Application Required documentations attached to APA application are as follows:

1. Name and address of taxpayer seeking APA. Accounting period of the entity and the transaction seeking APA.

2. Structure and relationship of the related parties. Types of business of the related parties and its shareholders.

3. Details of business revenue account showing all transactions. The

types of transaction undertaken amoung related parties including their Pricing Policy and details explanation of the reason for choosing such Policy.

4. Detailed analysis of assets and risks of all transactions

5. Detailed analysis of the structure of industries and their market share.

6. Transfer Pricing Methodology (TPM) chosen for APA and the reason for choosing such TPM.

7. Benchmarking study of comparables.

8. Critical Assumptions. Because the arm’s length price/range proposed by the taxpayer is a process of using past transactions to forecast of future business profit, important aspects (ie. shift of competition in the market, and change of business structure or accounting practice) can lead to cancellation or revocation of APA.

9. History and status of audits. Investigation report of any Transfer Pricing transaction within the past 5 accounting periods.

10. Any other relevant documents, if any, for example: accounting standard of related parties, or governmental regulation that may influence Transfer Pricing.

11. Other documents requested by the Revenue Department.

■ APA Application Approval Notice The Revenue Department shall notify the taxpayer of the result of the APA application within 3 months of the application of APA and documents according to 5.3
Taxpayer’s Cooperation During APA Process

During the APA process the Revenue Department needs to consider the documents according to 5.3 as well as other related information. Taxpayers are required to give full cooperation to the Revenue Department, e.g. supplying additional information within a reasonable time, or attending meetings with the Revenue Department officials, during the period of APA process. Any documents related to APA, which taxpayers provide to foreign tax authorities, shall also be required to provide to the Revenue Department within 7 working days starting from the date documentation have been delivered to the foreign tax authority.
Withdrawal of APA Application

Taxpayer may withdraw APA application by submitting a written letter to the Director-General before the day APA becomes effective.
Announcement of APA Conclusion

the Revenue Department and the foreign tax authority was made, the Revenue Department shall inform the taxpayer with a written notice. The notice generally provides:

1) Details of the taxpayer’s information, i.e. name, address.

2) Details of APA’s terms and conditions a. Covered Transaction b. Transfer Pricing Methodology c. APA Period d. Arm’s Length Price/Range e. Critical Assumptions f. Time frame for submitting APA Annual Report

3) Other details, if any
Termination of APA

Termination of APA is stated under the written notice. Nevertheless, in certain cases, the Revenue Department has the right to cancel, or revoke, APA before its termination,

forExample:

1) the taxpayer gave incorrect or insufficient information.

2) the taxpayer do not comply with regulation, process, and condition of APA.

3) the taxpayer refuse to cooperate with the Revenue Department.

4) the taxpayer, or the Revenue Department, ask for amendment, cancellation, or withdrawal of APA.

5) any event that changes, or effects, the condition or assumption stated under APA.

6) any amendment of domestic laws and international agreements that are relevant to APA. In this regard, the Revenue Department shall notify the taxpayer with a written letter in advance, allowing taxpayers to submit additional information, or the objection, within the time period before the cancellation or revocation of APA is considered.

Note : This document is a translation of the original Thai language guidance. The Thai original is the official text.
Other international tax

■Tax system for inadequate capital

Thin capitalization under the tax law, there are currently no thin capitalization or prescribed debt to equity rules in Thailand. For a taxpayer to obtain a BOI certificate to promote its business or obtain a foreign business license from the MOC, the taxpayer must maintain a debt-to-equity ratio of 3:1 (for BOI projects) or 7:1 (under the Foreign Business Act), including the minimum registered capital required by the authorities

●Tax system of tax heaven

A tax haven is a country that offers foreign individuals and businesses little or no tax liability in a politically and economically stable environment. Tax havens also provide little or no financial information to foreign tax authorities. Individuals and businesses that do not reside a tax haven can take advantage of these countries' tax regimes to avoid paying taxes in their home countries. Tax havens do not require that an individual reside in or a business operate out of that country in order to benefit from its tax policies.

Breaking down for Tax Haven are Andorra, the Bahamas, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Channel Islands, the Cook Islands, Hong Kong, the Isle of Man, Mauritius, Lichtenstein, Monaco, Panama, Switzerland and St. Kitts and Nevis are all considered tax havens. However, pressure from foreign governments that want to collect all the tax revenue they believe they are entitled to have caused some tax haven countries to sign tax information exchange agreements (TIEAs) and mutual legal assistance treaties (MLAT) that provide foreign governments with formerly secret information about investors'

offshore accounts.

Tax Havens are notorious for posing challenges to governments trying to effectively collect revenue. The level of tax collection and the conditions of offshore business raise the attention of all governments concerning the offshore transaction in these so-called tax havens. The growth in number of tax haven arrangements and their growing use among investors is prompting Thailand’s Revenue Department to pay more attention to such offshore transactions. The Revenue Department’s aggressive focus offshore transactions nearly make certain the taxpayer being challenged by the Revenue Department. In this article, we outline the meaning of tax haven and address issues regarding the legitimacy of tax haven arrangements that may benefit investors who plan to operate offshore arrangements. What is “Tax Haven”? When talking about “Tax haven”, we normally think about a jurisdiction used to avoid tax assessments.

In Thailand, the Revenue Department does not define “tax haven” but refers to the definition provided by the Organization of Economic Cooperation and Development (OECD). The OECD identifies three key factors for consideration of whether the jurisdiction is a tax haven:

§ No taxes or nominal taxes. Tax havens impose no or only nominal taxes and offer themselves as countries for non-residents to avoid tax in their countries of residence.

§ Lack of effective exchange of information. Tax havens typically have laws and administrative practices under which the businesses and individuals can benefit from strict, secretive rules and other protections against scrutiny by tax authorities.

§ Lack of transparency. The jurisdiction hosts legislative and administrative provisions that make it difficult for the tax authorities of other countries to apply laws effectively and fairly. Also, a lack of transparency would also make it difficult for tax authorities to determine taxpayer situations. Having no tax in a jurisdiction is not sufficient to characterize that jurisdiction as a tax haven. If a jurisdiction fits the first description above, then the other two factors should be analyzed. Even though an offshore activity is conducted in a tax haven, only the transaction motivated to conceal tax would trigger the attention of the Revenue Department Since the tax haven arrangements are an increasing concern, the question as to whether the tax haven arrangement is illegal would certainly be raised by the Revenue Department. The “substance over form” doctrine would play a dominant role to answer this question.

7.2 Several issues on domestic tax law

Tax system

■Types and system of tax in Thailand

In Thailand, taxes are imposed at both national and local levels. The central government is the main taxing authority. The principal taxes levied by the central government are as follows:

· Personal Income Tax

Personal Income Tax (PIT) is a direct tax levied on income of a person. A person means an individual, an ordinary partnership, a non-juristic body of person and an undivided estate. In general, a person liable to PIT has to compute his tax liability, file tax return and pay tax, if any, accordingly on a calendar year basis.

· Corporate Income Tax

Corporate Income Tax (CIT) is a direct tax levied on a juristic company or partnership carrying on business in Thailand or not carrying on business in Thailand but deriving certain types of income from Thailand.

· Petroleum Income Tax

Petroleum Income Tax (PT) is a direct tax, levied annually (for each accounting period of 12 months duration) on net profit of a “petroleum taxpayer”, who is carrying out the business of petroleum exploration and production. It is also levied on the disposal of profits outside of Thailand. The rules and regulations for Petroleum Income Tax are covered under Petroleum Income Tax Act and other related law. The rates, penalties, surcharge, etc. are different from that of Corporate Income tax.

· Value Added Tax

Value Added Tax (VAT) has been implemented in Thailand since 1992 replacing Business Tax (BT). VAT is an indirect tax imposed on the value added of each stage of production and distribution.

· Specific Business Tax

Specific Business Tax (SBT) is another kind of indirect tax introduced in 1992 to replace Business Tax. Certain businesses that are excluded from VAT will instead be subject to SBT.

· Stamp Duties

Stamp duties are taxed on instruments and not on transactions or persons. For the purposes of stamp duty, an instrument is defined as any document chargeable with duty under the Revenue Code. The stamp duty rules are contained in Chapter VI of Title II of the Revenue Code.

· Excise Tax

is levied on goods and services that are considered luxuries. These items are also subject to VAT. Some of the items included are -

Electrical appliances

Motor vehicles, motorcycles, and yachts

Lead crystal products

Non-alcoholic beverages

Perfume

Petroleum and petroleum products

Some services

· Customs Duty

Customs Duty is imposed on imported and some exported goods as indicated in the Customs Tariff statute. The types of exported goods subject to customs duty include leather, rice, rubber and teak. In the case of imported goods, customs duty is calculated on the CIF (cost, insurance and freight) value, and for exported goods, on the FOB (free on board) valuation.

Source of Tax Law

The principal tax law in Thailand is the Revenue Code, which governs personal and corporate income taxes, value added tax, specific business tax, and stamp duties. Customs duties are regulated by the Customs Act; the Excise Act governs excise tax; and the Petroleum Income Tax Act governs petroleum income tax.

Tax Administration Structure

The Revenue Department of the Ministry of Finance is responsible for the administration of personal income tax, corporate income tax, petroleum income tax, value added tax, specific business tax, and stamp duties. The administration of customs duties is the responsibility of the Customs Department, Ministry of Finance, while the administration of excise tax is the responsibility of the Excise Department, Ministry of Finance. In general, Thailand's tax administration follows the concept of self-assessment.

Taxpayers have a legal duty to declare their income and pay tax to the authorities. The income declared and tax paid are assumed to be correct. However, assessments may be conducted by the authorities in certain circumstances, such as failure to file tax returns or filing of false or inadequate tax returns.

■ National tax and local tax

● National tax

1. Personal Income Tax (PIT)

2. Corporate Income Tax (CIT)

3. Value Added Tax (VAT)

4. Specific Business Tax (SBT)

5. Stamp duty

6. Petroleum Income Tax (PT)

Personal Income Tax (PIT)

1. Taxable Person

Taxpayers are classified into “resident” and “non-resident”. “Resident” means any person residing in Thailand for a period or periods aggregating more than 180 days in any tax (calendar) year. A resident of Thailand is liable to pay tax on income from sources in Thailand as well as on the portion of income from foreign sources that is brought into Thailand. A non-resident is, however, subject to tax only on income from sources in Thailand.

2. TAX BASE

2.1 Assessable Income

Income chargeable to the PIT is called “assessable income”. The term covers income both in cash and in kind. Therefore, any benefits provided by an employer or other persons, such as a rent-free house or the amount of tax paid by the employer on behalf of the employee, is also treated as assessable income of the employee for the purpose of PIT. Assessable income is divided into 8 categories as follows:

1. income from personal services rendered to employers;

2. income by virtue of jobs, positions or services rendered;

3. income from goodwill, copyright, franchise, other rights, annuity or income in the nature of yearly payments derived from a will or any other juristic Act or judgment of the Court;

4. income in the nature of dividends, interest on deposits with banks in Thailand, shares of profits or other benefits from a juristic company, juristic partnership, or mutual fund, payments received as a result of the reduction of capital, a bonus, an increased capital holdings, gains from amalgamation, acquisition or dissolution of juristic companies or partnerships, and gains from transferring of shares or partnership holdings;

5. income from letting of property and from breaches of contracts, installment sales or hire-purchase contracts;

6. income from liberal professions;

7. income from construction and other contracts of work;

8. income from business, commerce, agriculture, industry, transport or any

other activity not specified earlier.

2.2 Deductions and Allowances

Certain deductions and allowances are allowed in the calculation of the taxable income. Taxpayer shall make deductions from assessable income before the allowances are granted. Therefore, taxable income is calculated by:

TAXABLE INCOME = Assessable Income - deductions - allowances

Deductions allowed for the calculation of PIT

Type of Income	Deduction
a. Income from employment	40% but not exceeding 60,000 baht
b. Income received from copyright	40% but not exceeding 60,000 baht
c. Income from letting out of property on hire
1) Building and wharves	30%
2) Agricultural land	20%
3) All other types of land	15%
4) Vehicles	30
5) Any other type of property	10%
d. Income from liberal professions	30% except for the medical profession where 60% is allowed
e. Income derived from contract of work whereby the contractor provides essential materials besides tools	actual expense or 70%
f. Income derived from business, commerce, agriculture, industry, transport, or any other activities not specified in a. to e.	actual expense or 65% - 85% depending on the types of income

Allowances (Exemptions) allowed for the calculation of PIT

Types of Allowances	Amount
Personal allowance
Single taxpayer	30,000 baht for the taxpayer
Undivided estate	30,000 baht for the taxpayer’s spouse
Non-juristic partnership or body of persons	30,000 baht for each partner but not exceeding 60,000 baht in total
Spouse allowance	30,000 baht
Child allowance (child under 25 years of age and studying at educational institution, or a minor, or an adjusted incompetent or quasi-incompetent person)	15,000 baht each (limited to three children)
Education (additional allowance for child studying in educational institution in Thailand)	2,000 baht each child
Parents allowance	30,000 baht for each of taxpayer’s and spouse’s parents if such parent is above 60 years old and earns less than 30,000 baht
Life insurance premium paid by taxpayer or spouse	Amount actually paid but not exceeding 100,000 baht each
Approved provident fund contributions paid by taxpayer or spouse	Amount actually paid at the rate not more than 15% of wage, but not exceeding 500,000 baht
Long term equity fund	Amount actually paid at the rate not more than 15% of wage, but not exceeding 500,000 baht
Home mortgage interest	Amount actually paid but not exceeding 100,000 baht
Social insurance contributions paid by taxpayer or spouse	Amount actually paid each
Charitable contributions	Amount actually donated but not exceeding 10% of the income after standard deductions and the above allowances

2.3Tax Credit for dividends

Any taxpayer who domiciles in Thailand and receives dividends from a juristic company or partnership incorporated in Thailand is entitled to a tax credit of 3/7 of the amount of dividends received. In computing assessable income, taxpayer shall gross up his dividends by the amount of the tax credit received. The amount of tax credit is creditable against his tax liability.

Progressive Tax Rates

3.1 Progressive Tax Rates

Personal income tax rates applicable to taxable income are as follows;

Tax rates of the Personal Income Tax

Taxable Income (baht)	Tax Rate (%)
0-150,000	Exempt
more than 150,000 but less than 300,000	5
more than 300,000 but less than 500,000	10
more than 500,000 but less than 750,000	15
more than 750,000 but less than 1,000,000	20
more than 1,000,000 but less than 2,000,000	25
more than 2,000,000 but less than 4,000,000	30
Over 4,000,000	35

To be implemented for the 2013 and 2014 tax years.

In the case where income categories (2) - (8) mentioned in 2.1 are earned more than 60,000 Baht per annum, taxpayer has to calculate the amount of tax by multiplying 0.5% to the assessable income and compare with the amount of tax calculated by progressive tax rates. Taxpayer is liable to pay tax at the amount whichever is greater.

3.2 Separate Taxation

There are several types of income that the taxpayer shall not include or may not choose to include such income to the assessable income in calculating the tax liability.

Income from sale of immovable property, Taxpayer shall not include income from sales of immovable property acquired by bequest or by way of gift to the assessable income when calculating PIT. However, if the sale is made for a commercial purpose, it is essential that such income must be included as the assessable income and be subject to PIT.

Interest

The following forms of interest income may, at the taxpayer’s selection, be excluded from the computation of PIT provided that a tax of 15 per cent is withheld at source:

1. interest on bonds or debentures issued by a government organization;

2. interest on saving deposits in commercial banks if the aggregate amount of interest received is not more than 20,000 baht during a taxable year;

3. interest on loans paid by a finance company;

4. interest received from any financial institution organized by a specific law of Thailand for the purpose of lending money to promote agriculture, commerce or industry.

Dividends, Taxpayer who resides in Thailand and receives dividends or shares of profits from a registered company or a mutual fund which tax has been withheld at source at the rate of 10 per cent, may opt to exclude such dividend from the assessable income when calculating PIT. However, in doing so, taxpayer will be unable to claim any refund or credit as mentioned in 2.4.

3.3 Withholding Tax

For certain categories of income, the payer of income has to withhold tax at source, file tax return (Form PIT 1, 2 or 3 as the case may be) and submit the amount of tax withheld to the District Revenue Office. The tax withheld shall then be credited against tax liability of a taxpayer at the time of filing PIT return. The following are the withholding tax rates on some categories of income.

Types of income (baht)	Withholding tax rate (baht)
1. Employment income	5 - 37 %
2. Rents and prizes	5 %
3. Ship rental charges	1 %
4. Service and professional fees	3 %
5. Public entertainer remuneration - Thai resident - non resident	5 % 5 - 37 %
6. Advertising fees	2 %

Tax Payment

Taxpayer is liable to file Personal Income Tax return and make a payment to the Revenue Department within the last day of March following the taxable year. Taxpayer, who derives income specified in c, d or f in 2.3 during the first six months of the taxable year is also required to file half - yearly return and make a payment to the Revenue Department within the last day of September of that taxable year. Any withholding tax or half-yearly tax which has been paid to the Revenue Department can be used as a credit against the tax liability at the end of the year.

Corporate Income Tax (CIT)

1. Taxable Person

1.1 A company or a juristic partnership incorporated under Thai law.

(1) Limited company

(2) public company limited

(3) limited partnership

(4) registered partnership

1.2 A company or a juristic partnership incorporated under foreign law

1.2.1 A company or juristic partnership incorporated under foreign laws and carrying on business in Thailand.

1.2.2 A company or juristic partnership incorporated under foreign laws and carrying

on business in other places including Thailand.

1.2.3 A company or juristic partnership incorporated under foreign laws and carrying

on business in other places including Thailand , in case of carriage of goods or

carriage of passengers

1.2.4 A company or juristic partnership incorporated under foreign laws which has an employee, an agent or a go-between for carrying on business in Thailand and as a result receives income or profits in Thailand.

1.2.5 A company or juristic partnership incorporated under foreign laws and not carrying on business in Thailand but receiving assessable income under Section 40 (2)(3)(4)(5) or (6) which is paid from or in Thailand.

1.3 A business operating in a commercial or profitable manner by a foreign government, organization of a foreign government or any other juristic person established under a foreign law.

1.4 Joint venture

1.5 A foundation or association carrying on revenue generating business, but does not include the foundation or association as prescribed by the Minister in accordance with Section 47 (7) (b) under Revenue Code

2. File a Tax Return and Payment

Thai and foreign companies carrying on business in Thailand are required to file their tax returns (Form CIT 50) within one hundred and fifty (150) days from the closing date of their accounting periods. Tax payment must be submitted together with the tax returns. Any company disposing funds representing profits out of Thailand is also required to pay tax on the sum so disposed within seven days from the disposal date (Form CIT 54).

In addition to the annual tax payment, any company subject to CIT on net profits is also required to make tax prepayment (Form CIT 51). A company is obliged to estimate its annual net profit as well as its tax liability and pay half of the estimated tax amount within two months after the end of the first six months of its accounting period. The prepaid tax is creditable against its annual tax liability.

As regards to income paid to foreign company not carrying on business in Thailand, the foreign company is subject to tax at a flat rate in which the payer shall withhold tax at source at the time of payment. The payer must file the return (Form CIT 54) and make the payment to the Revenue Department within seven days of the following month in which the payment is made.

Accounting period

An accounting period shall be twelve months except in the following cases where it may be less than twelve months:

1. a newly incorporated company or juristic partnership may elect to use the period from its incorporation date to any one date as the first accounting period.

2. a company or juristic partnership may file a request to the Director-General to change the last day of an accounting period. In such a case, the Director-General shall have the power to grant approval as he deems appropriate. Such an order shall be notified to the company or juristic partnership who files the request within a reasonable period of time and in the case where the Director-General grants the permission, the company or juristic partnership shall comply to the accounting period as prescribed by the Director-General.

Tax Calculation

In the calculation of CIT of a company carrying on business in Thailand, it is calculated from the company's net profit on the accrual basis. A company shall take into account all revenue arising from or in consequence of the business carried on in an accounting period and deducting therefrom all expenses in accordance with the condition prescribed by the Revenue Code. As for dividend income, one-half of the dividends received by Thai companies from any other Thai companies may be excluded from the taxable income. However, the full amount may be excluded from taxable income if the recipient is a company listed in the Stock Exchange of Thailand or the recipient owns at least 25% of the distributing company's capital interest, provided that the distributing company does not own a direct or indirect capital interest in the recipient company. The exclusion of dividends is applied only if the shares are acquired not less than 3 months before receiving the dividends and are not disposed of within 3 months after receiving the dividends.

In calculating CIT, deductible expenses are as follows:

1. Ordinary and necessary expenses. However, the deductible amount of the following

expenses is allowed at a special rate:

- 200% deduction of Research and Development expense,

- 200% deduction of job training expense,

- 200% deduction of expenditure on the provision of equipment for the disabled;

2. Interest, except interest on capital reserves or funds of the company;

3. Taxes, except for Corporate Income Tax and Value Added Tax paid to the Thai government;

4. Net losses carried forward from the last five accounting periods;

5. Bad debts;

6.Wear and tear;

7. Donations of up to 2% of net profits;

8. Provident fund contributions;

9. Entertainment expenses up to 0.3% of gross receipt but not exceeding 10 million baht;

10. Further tax deduction for donations made to public education institutions, and also for any expenses used for the maintenance of public parks, public playgrounds, and/or sports grounds;

11. Depreciation: Provided that in no case shall the deduction exceed the following percentage of cost as shown below. However, if a company adopts an accounting method, which the depreciation rates vary from year to year, the company is allowed to do so provided that the number of years over which an asset depreciated shall not be less than 100 divided by the percentage prescribed below.

Types of Assets

Depreciation Rates

1. Building

1.1 Durable building

1.2 Temporary building

5 %

100 %

2. Cost of acquisition of depleted natural resources

5 %

3. Cost of acquisition of lease rights

3.1 no written lease agreement

3.2 written lease agreement containing no renewal clause or containing renewal clause but with a definite duration of renewal periods

10 %

100% divided by the original and renewable lease periods

4. Cost of acquisition of the right in a process, formula, goodwill, trademark, business license, patent, copyright or any other rights:

4.1 unlimited period of use

4.2 limited period of use

10 %

100% divided by number of years used

5. Other depreciation except land and goods

5.1 machinery used in R&D

5.2 cash registering machine

5.3 passenger car or bus with no more than 10 passengers capacity

20 %

initial allowance of 40% on the date of acquisition and the residual can be depreciated at the rate in 5

depreciated at the rate in 5 but the depreciable valve is limited to one million baht

6. Computer and accessories

6.1 SMEs^*

6.2 other business

initial allowance of 40% on the date of acquisition and the residual can be depreciated over 3 years

depreciated over 3 years

7. Computer programs

7.1 SMEs^*

7.2 other business

initial allowance of 40% on the date of acquisition and the residual can be depreciated over 3 years

depreciated over 3 years

* SMEs refer to any Thai companies with fixed assets less than 200 million baht and number of employee not exceeding 200 people

12. The following items shall not be allowed as expenses in the calculation of net profits:

(1) Reserves (with some exceptions):

(2) Fund except provident fund under the rules, procedures and conditions prescribed by a Ministerial regulations.

(3) Expense for personal, gift, or charitable purpose except expense for public charity, or for public benefit

(4) Entertainment or service fees

(5) Capital expense or expense for the addition, change, expansion or improvement of an asset but not for repair in order to maintain its present condition.

(6) Fine and/or surcharge, criminal fine, income tax of a company or juristic partnership.

(7) The withdrawal of money without remuneration of a partner in a juristic partnership

(8) The part of salary of a shareholder or partner which is paid in excess of appropriate amount.

(9) Expense which is not actually incurred or expense which should have been paid in another accounting period except in the case where it cannot be entered in any accounting period, then it may be entered in the following accounting period.

(10) Remuneration for assets which a company or juristic partnership owns and uses.

(11) Interest paid to equity, reserves or funds of the company or juristic partnership itself.

(12) Damages claimable from an insurance or other protection contracts or loss from previous accounting periods except net loss carried forward for five years up to the present accounting period.

(13) Expense which is not for the purpose of making profits or for the business.

(14) Expense which is not for the purpose of business in Thailand.

(15) Cost of purchase of asset and expense related to the purchase or sale of asset, but only the amount in excess of normal cost and expense without reasonable cause.

(16) Value of lost or depleted natural resources due to the carrying on of business.

(17) Value of assets apart from devalued assets subject to Section 65 Bis.

(18) Expense which a payer cannot identify the recipient.

(19) Any expense payable from profits received after the end of an accounting period.

(20) Expense similar to those specified in (1) to (19) as will be prescribed by a Royal Decree.

Tax Rates

The corporate income tax rate in Thailand is 20 % on net profit (accounting periods 2015) . However, the rates vary depending on types of taxpayers

Taxpayer	Tax Base	Rate (%)
1. Small company¹	- Net profit from 300,000 not exceeding 3 millions baht - Net profit over 3 millions baht	15% 20% (accounting periods 2015)
2. Companies listed in Stock Exchange of Thailand (SET)	Net profit	20% (accounting periods 2015)
3. Companies newly listed in Stock Exchange of Thailand (SET)	Net Profit	20% (accounting periods 2015)
4. Company newly listed in Market for Alternative Investment (MAI)	Net Profit	20% (accounting periods 2015)
5. Bank deriving profits from International Banking Facilities (IBF)	Net Profit	10%
6. Foreign company engaging in international transportation	Gross receipts	3%
7. Foreign company not carrying on business in Thailand receiving dividends from Thailand	Gross receipts	10%
8.. Foreign company not carrying on business in Thailand receiving other types of income apart from dividend from Thailand	Gross receipts	15%
9. Foreign company disposing profit out of Thailand.	Amount disposed.	10%
10. Profitable association and foundation.	Gross receipts	2% or 10%

Notes:

1. A small company refers to any company with paid-up capital less than 5 million baht at the end of each accounting period.

Withholding Tax

Certain types of income paid to companies are subject to withholding tax at source. The withholding tax rates depend on the types of income and the tax status of the recipient. The payer of income is required to file the return (Form CIT 53) and submit the amount of tax withheld to the District Revenue Offices within seven days of the following month in which the payment is made. The tax withheld will be credited against final tax liability of the taxpayer. The following are the withholding tax rates on some important types of income.

Types of income	Withholding tax rate
1.Dividends	10 %
2.Interest¹	1 %
3.Royalties²	3%
4. Advertising Fees	2%
5. Service and professional fees	3 % if paid to Thai company or foreign company having permanent branch in Thailand; 5% if paid to foreign company not having permanent branch in Thailand
6. Prizes	5%

Notes:

1. Tax will be withheld on interest paid to associations or foundations at the rate of 10%.

2. Royalties paid to associations or foundations are subject to 10% withholding tax rate.

3. Government agencies are required to withhold tax at the rate of 1% on all types of income paid to companies

Value Added Tax (VAT)

Value Added Tax (VAT) has been implemented in Thailand since 1992 replacing Business Tax (BT). VAT is an indirect tax imposed on the value added of each stage of production and distribution.

1. Taxable Person

Any person or entity who regularly supplies goods or provides services in Thailand and has an annual turnover exceeding 1.8 million baht is subject to VAT in Thailand. Service is deemed to be provided in Thailand if the service is performed in Thailand regardless where it is utilized or if it is performed elsewhere and utilized in Thailand.

An importer is also subject to VAT in Thailand no matter whether one is a registered person or not. VAT will be collected by the Customs Department at the time goods are imported. Certain businesses are excluded from VAT and will instead be subjected to Specific Business Tax (SBT). Under VAT, taxable goods mean all types of property, tangible or intangible, whether they are available for sales, for own use, or for any other purposes. It also includes any types of articles imported into Thailand. Services refer to any activities conducted for the benefits of a person or an entity, which are not the supply in terms of goods.

2. Exemptions

Certain activities are exempted from VAT. Those activities are as follows:

Small entrepreneur whose annual turnover is less than 1.8 million baht;
Sales and import of unprocessed agricultural products and related goods such as fertilizers, animal feeds, pesticides, etc.;
Sales and import of newspapers, magazines, and textbooks;
Certain basic services such as:
- transportation : domestic and international transportation by way of land;
- healthcare services provided by government and private hospitals as well as clinics;v
- educational services provided by government and private schools and other recognized educational institutions;
professional services : Medical and auditing services, lawyer services in court and other similar professional services that have laws regulating such professions;
income from business, commerce, agriculture, industry, transport or any other activity not specified earlier.
Cultural services such as amateur sports, services of libraries, museums, zoos;
Services in the nature of employment of labour, research and technical services and services of public entertainers;
Goods exempted from import duties under the Industrial Estate law imported into an Export Processing Zones (EPZs) and under Chapter 4 of the Customs Tariff Act;
Imported goods that are kept under the supervision of the Customs Department which will be re-exported and be entitled to a refund for import duties; and
Other services such as religious and charitable services, services of government agencies and local authorities.

3. Tax Base

3.1 General Goods and Services

Tax base of VAT is the total value received or receivable from the supply of goods or services. Value means money, property, consideration, service fees, or any other benefits which is ascertainable in terms of money. Tax base will also include any Excise tax arises in connection with such supply. However, tax base is exclusive of the value added tax itself and does not include any discounts or allowances, but only if discounts or allowances are clearly shown in the tax invoices.

3.2 Imported Goods

Tax base = C.I.F. price + Import duty + Excise Tax (if any) + other taxes and fees (if any)

3.3 Exported Goods

Tax base = F.O.B. price + Excise Tax (if any) + other taxes and fees (if any)

4. Tax Rates

            4.1 General Rate
                  Currently, the rate is 7 percent.
            4.2 Zero Percent Rate
                  Certain activities are liable to VAT at the rate of zero percent. Those activities include:

§ export of goods;

§ services rendered in Thailand and utilized outside Thailand in accordance with rule, procedure and condition prescribed by the Director-General;

§ aircraft or sea-vessels engaging in international transportation;

§ supply of goods and services to government agencies or state-owned enterprises under foreign-aid program;

§ supply of goods and services to the United Nations and its agencies as well as embassies, consulate-general and consulates;

§ supply of goods and services between bonded warehouses or between enterprises located in EPZs.

The time of supply of goods or services is important because it determines when a registered person should account for VAT. The time of supply will be determined as follows:

5. VAT for Goods

5.1 General goods, the earliest of:

the time of delivery; or
when ownership of goods is transferred; or
a payment is made; or
a tax invoice is issued.

5.2 Hire-purchase or installment sale, the earliest of:

the time each payment is due; or
a payment is made; or
a tax invoice is issued.

5.3 Supply of goods on consignment, the earliest of:

the time the consignee makes delivery or transfers; or
ownership of the goods to buyer; or
a payment is made; or
a tax invoice is issued.

5.4 Imports, the earliest of:

the time import duty is paid; or
a guarantee is put up; or
a guarantor is arranged for; or
a bill of lading is issued.

5.5 Exports, the earliest of :

the time export duty is paid; or
a guarantee is put up; or
a guarantor is arranged for; or
a bill of lading is issued; or
goods are sent from Thailand to an EPZ; or
goods are exported from a bonded warehouse.

6. VAT for Services

6.1 In general, the earliest of :

the time a payment is made; or
tax invoice is issued; or
service is utilized.

6.2 Service contract where payment is made according to the service performed,

the earliest of:

the time a payment is made; or
tax invoice is issued; or
service is utilized.

6.3 Imports

the time the payment is made.

7. Tax invoice

VAT registered person or entity is required to issue tax invoices every time the transactions are made showing details of nature and value of goods sold or services provided and also amount of VAT due. Tax invoice is used as evidence for claiming input tax credit. Tax invoice must contain at least the following elements;

The word "Tax invoice" in a prominent place,
Name, address and tax identification number of the issuer,
Name and address of the purchaser or customers,
Serial numbers of tax invoice and tax invoice books (if applicable),
Description, value and quantity of goods or services;
Amount of VAT chargeable, and
Date of issuance.

8. Tax calculation

            VAT liability = Output Tax - Input Tax
            "Output Tax" is a tax collected or collectible by VAT registered person from his customers when goods or services are supplied.
            "Input Tax" is a tax charged by another registered person on any purchase of goods or provision of services. The term also includes any tax charged on imported goods.

9. VAT refund

In each month, if input tax exceeds output tax, taxpayer can claim for the refund, either in form of cash or tax credit to be used in the following months. Therefore, in case of zero-rated, taxpayer will always be entitled to VAT refund. As for unused input tax, it may be creditable against output tax within the next 6 months. However, the refund can only be claimed within 3 years from the last day of filing date.

Certain input taxes, such as tax in relation to entertaining expenses, are not creditable under VAT. However, those non-creditable input taxes can instead be used as deductible expenses under Corporate Income Tax (CIT).

10. VAT registation

Any person or entity who is liable to VAT in Thailand must register to be VAT registered person or entity (Form VAT 01) before the operation of business or within 30 days after its income reaches the threshold. The registration application must be submitted to Area Revenue Offices if the business is situated in Bangkok or to the Area Revenue Branch Offices if it is situated elsewhere. Should taxpayer have several branches, registration application must be submitted to the Revenue Office where the head quarter is situated.

11. Tax reture and payment

VAT taxable period is a calendar month. VAT return therefore must be filed on a monthly basis. VAT return (Form VAT 30) together with tax payment, if any, must be submitted to Area Revenue Branch Office within 15 days of the following month. If taxpayer has more than one place of business, each place of business must file the return and make a payment separately unless there is an approval from the Director-General of the Revenue Department. Services utilized in Thailand supplied by service providers in other countries are also subject to VAT in Thailand. In such a case, service recipient in Thailand is obliged to file VAT return (Form VAT 36) and pay tax, if any, on behalf of the service providers.

In the case where supply of goods or services is also subject to Excise tax, VAT return and tax payment, if any, must be submitted to the Excise Department together with Excise tax return and tax payment within 15 days of the following month. In case of imported goods, VAT return and tax payment must be submitted to the Customs Department at the point of import.

Specific Business Tax (SBT)

Specific Business Tax (SBT) is another kind of indirect tax introduced in 1992 to replace Business Tax. Certain businesses that are excluded from VAT will instead be subject to SBT.

1. Person liable to SBT

Any person or entity who engages in certain businesses in Thailand is subject to SBT instead of VAT. Businesses that are subject to SBT include:

(1) banking under the law governing commercial banking or any other specific law

(2) business of finance, securities and credit foncier under the law governing operation of the business of finance, securities and credit foncier

(3) life insurance under the law governing life insurance

(4) pawn broking under the law governing pawnshops

(5) business with regular transactions similar to commercial banks, such as provision of loans, provision of guarantees, exchange of currencies, issuance, purchase or sale of bills or transfer of money abroad by different means;

(6) sale of an immovable property in a commercial or profitable manner, irrespective of the manner in which such property is acquired, only in accordance with the rules, procedures and conditions prescribed by a royal decree

(7) sale of securities in a securities market under the law governing securities exchange of Thailand

(8) any other business as prescribed by a royal decree.

2. Exemptions

Activities of certain entities are exempted from SBT such as:

(1) business of the Bank of Thailand, the Government Savings Bank, the Government Housing Bank, and the Bank for Agriculture and Agricultural Cooperatives

(2) business of the Industrial Financial Corporation of Thailand

(3) business of a savings cooperative, only in respect of loans provided to its members or to another savings cooperative

(4) business of a provident fund under the law governing provident funds

(5) business of the National Housing Authority, only in respect of sale or hire-purchase of an immovable property

(6) pawn broking business of a ministry, sub-ministry, department and a local government authority

(7) any other business under section 91/2 as prescribed by a royal decree

3. Tax Base and Tax Rates

The tax base for a business in accordance with the provisions of this Chapter shall be the following gross receipts received or receivable from the business carried on by a person liable to tax

Business	Tax Base	Tax Rate (%)
1. Banking, Finance and similar business	Interest, discounts, service fees, other fees, profits from foreign exchange	3.0
2. business of finance, securities and credit foncier	Interest, discounts, service fees, other fees, profits from foreign exchange	3.0
3. Life Insurance	Interest, service fees and other fees	2.5
4. Pawn Brokerage	Interest, fees, remuneration from selling overdue property	2.5
5. business with regular transactions similar to commercial banks	Interest, discounts, service fees, other fees, profits from foreign exchange	3.0
6. Real estate	Gross receipts	0.1
7. sale of securities in a securities market	Gross receipts	0.1 (exempted)

Remark : Local tax at the rate of 10 % is imposed on top of SBT.

1. SBT Registration

Any entity or person who is subject to SBT must register to be SBT registered person or entity (Form ภธ. 01) within 30 days of its first day of operation at the Area Revenue Office if it is situated in Bangkok or at District Revenue Office it is situated elsewhere. Should taxpayer have several branches or offices, registration application must be submitted to Area or District Revenue Office where the headquarter is situated.

In the case of an operator who is a foreign resident, a person who is an agent of such operator shall be responsible in undertaking specific business tax registration for the operator who is a foreign resident.

7.3 File a Tax Return and Payment

File a Tax Return and Payment

SBT taxable period is a calendar month. SBT return (Form ภธ. 40) must be filed on a monthly basis regardless whether or not the business has income. SBT return and payment must be submitted to the District Revenue Office within 15 days of the following month. If taxpayer has more than one place of business, each place of business must file its return and make the payment separately unless there is an approval from the Director-General.

Stamp duty

1. Persons liable to stamp duty

1.1 Only instruments listed in the stamp duty schedule are subject to the stamp duty and the persons liable to pay stamp duty are those listed in column 3 of the schedule. They are, for example, the persons executing the instrument, the holders of the instrument or the beneficiary.

1.2 If an instrument liable to duty is executed outside of Thailand, the first holder of the

instrument in Thailand shall pay the duty by stamping at the full amount and canceling within 30 days from the date of receiving the instrument. If he does not comply as such, the instrument shall not be deemed duty stamped.

If he does not comply with the provisions of Paragraph 1, any holder of the instrument shall pay the duty by stamping at the full amount and canceling, and then he shall be able to submit the instrument for collection, endorsement, transfer or claiming of benefit.

Any holder who acquires possession of the instrument in accordance with this Section before the expiration of the time limit specified in Paragraph 1 may pay the duty by stamping at the full amount and canceling, and he has the right of recourse against the previous holders.

1.3 If a bill submitted for payment is not duty stamped, the recipient of the bill may pay the duty by stamping at the full amount and canceling, and may either have the right of recourse against the person liable to duty or deduct the amount of duty from the payment due.

1. Instruments liable to stamp duty

The instruments liable to stamp duty include, inter alia, transfers of land, a lease, stock transfers, debentures, mortgages, life assurance policies, annuities, power of attorney, promissory notes, letters of credit, travelers cheques.

2. How to duty stamped

"Duty stamped" means

(1) in the case of an adhesive stamp, payment of duty is made by affixing a stamp on the paper, before or immediately when an instrument is executed, in an amount not less than the duty payable, and canceling such stamp; or

(2) in the case of an impressed stamp, payment of duty is made by using a paper with an impressed stamp in an amount not less than the duty payable and canceling such stamp, or by submitting an instrument to an official to impress the stamp and paying an amount not less than the duty payable and canceling such stamp; or

(3) in the case of payment by cash, payment of duty is made in cash in an amount not less than the duty payable in accordance with the provisions of this Chapter or in accordance with a regulation prescribed by the Director-General with the Minister’s approval.

In stamping duty as prescribed under (1) and (2), the Director-General shall have the power to order the compliance in accordance with (3) instead

1. Rate of Stamp Duty

Rates of stamp duty are given in the schedule attached to the Chapter VI of Title II of the Revenue Code. The rates of duty range from 1 Baht to 200 Baht. A sample of stamp duty rates on some selected instrument is as follows:

Nature of Instrument/Transaction	Stamp Duty
1.Rental of land, building, other construction or floating house For every 1,000 Baht or fraction thereof of the rent or key money or both for the entire lease period	1 Baht
2. Transfer of share, debenture, bond and certificate of debt issued by any company, association, body of persons or organization. For every 1,000 Baht or fraction thereof of the paid-up value of shares, or of the nominal value of the instrument, whichever is greater.	1 Baht
3. Hire-purchase of property. For every 1,000 baht or fraction thereof of the total value	1 Baht
4. Hire of work For every 1,000 Baht or fraction thereof of the remuneration prescribed.	1 Baht
5. Loan of money or agreement for bank overdraft For every 2,000 Baht or fraction thereof of the total amount of loan or the amount of bank overdraft agreed upon. Duty on the instrument of this nature calculating into an amount exceeding 10,000 Baht shall be payable in the amount of 10,000 Baht.	1 Baht
6. Insurance policy (a) Insurance policy against loss For every 250 baht or fraction thereof of the insurance premium. (b) Life insurance policy For every 2,000 baht or fraction thereof of the amount insured. (c) Any other insurance policy For every 2,000 baht or fraction thereof of the amount insured. (d) Annuity policy For every 2,000 baht or fraction thereof of the principal amount, or, if there is no principal amount, for every 2,000 baht or fraction thereof of 33 1/3 times the annual income. (e)Insurance policy where reinsurance is made by an insurer to another person. (f)Renewal of insurance policy	1 Baht 1 Baht 1 Baht 1 Baht 1 Baht 1 Baht Half the rate for the original policy
7. Authorization letter i.e., a letter appointing an agent, which is not in the form of instrument or contract including a letter appointing arbitrators: (a) authorizing one or more persons to perform an act once only. (b) authorizing one or more persons to jointly perform acts more than once. (c) authorizing to perform acts more than once by authorizing several persons to perform acts separately; the instrument will be charged on the basis of each individual who is authorized.	10 Baht 30 Baht 30 Baht
8. Proxy letter for voting at a meeting of a company (a) Authorized for one meeting only (b) Authorized for more than one meeting	20 Baht 100 Baht
9. (1) Bill of exchange or similar instrument used like bill of exchange for each bill or instrument (2) Promissory note or similar instrument used like promissory note for each note or instrument	3 Baht 3 Baht
10. Bill of lading	2 Baht
11. (1) Share or debenture certificate, or certificate of debt issued by any company, association, body of persons or organization (2) Bond of any government sold in Thailand For every 100 baht or fraction thereof.	5 Baht 1 Baht
12. Cheque or any written order used in lieu of cheque for each instrument	3 Baht
13. Receipt for interest bearing fixed deposit in a bank	5 Baht
14. Letter of credit (a) Issued in Thailand - For value less than 10,000 Baht - For value of 10,000 Baht or over (b) Issued abroad and payable in Thailand for each payment	20 Baht 30 Baht 20 Baht
15. Traveler’s cheque (a) For each cheque issued in Thailand (b) For each cheque issued abroad but payable in Thailand	3 Baht 3 Baht
16. Each goods’ receipt issued in connection with carriage of goods by waterway, land and air, namely, an instrument signed by an official or cargo master of a transport vehicle which carries goods as specified in that receipt upon issuing the bill of lading	1 Baht
17. Guarantee (a) For an unlimited amount of money (b) For an amount exceeding 1,000 baht (c) For an amount exceeding1,000 baht but not exceeding 10,000 baht (d) For an amount exceeding 10,000 baht	10 Baht 1 Baht 5 Baht 10 Baht
18. Pawn broking For every 2,000 baht or fraction thereof of the debt. If the pawn broking does not limit the amount of debt.	1 Baht 1 Baht
19. Warehouse receipt	1 Baht
20. Delivery order	1 Baht
21. Agency (a) specific authorization (b) general authorization	10 Baht 30 Bah
22. Decision given by an arbitrator (a)In the case where the dispute is concerned with the amount of money or price for every 1,000 baht or fraction thereof (b)In the case where no amount of money or price is mentioned.	1 Baht 10 Baht
23. Duplicate or counterfoil of an instrument, namely, an instrument having the same contents as the original document or contract and signed by the person executing the instrument in the same manner as the original. (a)If the duty payable for the original does not exceed 5 baht. (b)If the duty exceeds 5 baht.	1 Baht 5 Baht
24. Memorandum of association of a limited company submitted to the registrar.	200 Baht
25. Articles of association of a limited company submitted to the registrar.	200 Baht
26.New articles of association, copy of amended memorandum of association or articles of association submitted to the registrar.	50 Baht
27. Partnership contract (a) Contract on the establishment of a partnership (b) Amendment of the contract on the establishment of a partnership	100 Baht 50 Baht
28.Receipt only as specified below: (a) Receipt issued for government lottery prizes; (b) Receipt issued in connection with a transfer of, or creation of any right in, an immovable property, if the juristic act which gives rise to such receipt is registered under the law; (c) Receipt issued in connection with a sale, sale with right of redemption, hire-purchase or transfer of ownership in a vehicle, only if the vehicle is registered under the law governing such vehicle. If the receipt under (a) (b) (c) has an amount of 200 Baht or more: for every 200 Baht or fraction thereof.	1 Baht

Surcharge

5.1 Where an instrument is not duly stamped, the person liable to duty or the holder of the instrument or the beneficiary thereunder shall be entitled to present the instrument to the tax official for payment of duty who shall allow payment of the duty, subject to the following provisions:

(a) Where the instrument not duly stamped is an instrument executed in Thailand and is presented to tax official for payment of duty within 15 days from the day when the instrument was required to be duly stamped, payment of duty shall be allowed merely at the rates set forth in the Stamp Duty Schedule.

(b) In other cases, payment of duty shall be allowed, but a surcharge shall be imposed as follows:

(1) If it appears to the tax official that no more than 90 days have passed since the days when the instrument was required to be duly stamped, there shall be imposed a surcharge of twice the amount of duty or of 4 Baht, whichever is higher.

(2) If it appears to the official that more than 90 days have passed since the day when the instrument was required to be duly stamped, there shall be imposed a surcharge of five times the amount of the duty or of 10 Baht, whichever is higher.

If, in consequence of the inspection conducted by the official or of the charge preferred or information furnished by any person, whether or not a government official, it appears that:

(a) a receipt required to be issued under the Revenue Code has not been issued, the tax official shall have the power to charge the full amount of duty, and in addition, to impose a surcharge of six times the amount of the duty or of 25 Baht, whichever is higher.

(b) an instrument has not been duly stamped because

(1) no stamp has been affixed, the tax official shall have the power to charge the full amount of duty and, in addition, to impose a surcharge of six times the amount of the duty or of 25 Baht, whichever is higher.

(2) the amount of the stamps affixed is less than the amount of duty payable, the tax official shall have the power to charge the deficiency and, in addition, to impose a surcharge of six times the amount of the deficiency or of 25 Baht, whichever is higher.

(3) in all other cases, the competent official shall have the power to impose a surcharge equal to the amount of duty payable or 25 Baht, whichever is higher.

5.2 Punishment

(1) Whoever liable to duty or required to cancel stamps fails or refuses to pay the duty or to cancel the stamps shall be punished with a fine not exceeding 500 Baht.

(2) Whoever, with a view to evading payment of duty, issued a receipt of less than 10 Baht for the value received of 10 Baht or over, or divides the value received, or, with a view to evading compliance with the legal provisions on the stamp duty, willfully falsifies any instrument, shall be guilty and punished with a fine not exceeding 200 Baht.

(3) Whoever intentionally puts a false date of cancellation of a stamp shall be punished with a fine not exceeding 500 Baht or imprisonment not exceeding three months or both.

(4) Whoever fails to prepare or keep records of the daily total of money or price, or fails to issue a receipt immediately on demand in pursuance, or issues a receipt not stamped in the correct amount, shall be punished with a fine not exceeding 500 Baht.

(5) Whoever by himself or in conspiracy with another person prevents issuance of a receipt, or fails to issue a receipt immediately upon receiving payment of money or price or issues a receipt showing an amount less than that of the money or price actually received, shall be punished with a fine not exceeding 500 Baht or imprisonment not exceeding one month or both.

(6) Whoever knowing fails to extend facilities to the tax official or tax inspector in the performance of his duty, or seizure of any instruments or documents, or disobeys the summons issued by the tax official or tax inspector or refuses to give answers when questioned, or contravenes the provisions on issuing receipts or invoices or procedural directions issued by the Director-General of the Revenue Department shall be guilty and punished with a fine no exceeding 500 Baht.

(7) Whoever, with fraudulent intention, has in possession a stamp known to be forged or deals in stamps which have been used or declared out of use by Ministerial Regulations shall be guilty and punished with a fine not exceeding 5,000 Baht or imprisonment not exceeding three years or both.

Petroleum Income Tax (PT)

An accounting period is normally 12 months. The Director General may grant permission for more or less than 12 months, if appropriately justified. The first accounting period shall begin on the day that the company makes its first sale or disposal of petroleum subject to royalty. This day is considered as the beginning date of the accounting period. An accounting period may be shorter than 12 months for the following case:

a)	if the company takes any day as the closing date of the first accounting period:
b)	if the company ceases its petroleum business, the date of dissolution shall be the closing date of the accounting period:
c)	if the company changes the closing date of an accounting period with the approval of the Director-General.

In the case the company transfers any rights under a concession prior to the beginning date of the first accounting period, this date of transfer shall be treated as the beginning and closing date of the accounting period.

1. Tax based

The term ‘petroleum taxpayer’ covers anybody who:

	(1)	holds a concession under petroleum law or has a joint interest in it; or
	(2)	purchases crude oil produced by any concessionaire, all of which is intended for export.

A concession under petroleum law (to be obtained from Department of Mineral Resources) is required only for exploration and production of petroleum products (including crude oil, natural gas and liquid natural gas). Downstream industries including refining are not covered under Petroleum Income Tax Act. The tax is characterized by the presence of very few taxpayers.

There are 2 important amendments to the Petroleum Income Tax Act (in the years B.E. 2522 and B.E. 2532) creating 3 different versions. Each Petroleum Taxpayer is covered under one or more of the three versions (referred as status of taxpayer). Filing requirement is that taxpayer should submit one return per TIN per period per status. In case a taxpayer has to file returns under more than one status, he has to do so treating each status as a separate company. (in matters of allowances, adjusting of carried forward loss, etc.)

The important differences in tax calculation/remittance between the three versions of the Act are as follows:

Act 2514 (status 1)	Only annual return. No need for half year return. Interest not allowed as expense. Royalty allowed as tax credit. No levy of special remuneratory benefit tax. High tax rate of 50%
Act 2522 (status 2)	Only annual return. No need for half year return. Interest allowed as expense. (but a high withholding tax of 50% on interest paid is levied. Royalty allowed as expense. No levy of special remuneratory benefit tax. Low tax rate of 35% High profit remittance tax of 23.08%
Act 2532 (status 3)	Annual and half yearly returns required. Interest not allowed as expense. Royalty allowed as expense. Additional levy of special remuneratory benefit tax. High tax rate of 50%

All Petroleum Taxpayers are required to pay withholding tax @ 50 % on profits on transfers (transfer proceeds less loss carried forward) when petroleum property or right is transferred and if the total amount of such income is not definitely determinable.

While calculating net profit, following items are included as revenue:

(1)	Gross Income from sale of petroleum;
(2)	Value of petroleum disposed of;
(3)	Value of petroleum delivered as payment of royalty in kind;
(4)	Gross income arising from a transfer of any property or right related to petroleum business, if the total amount of such gross income is definitely determinable;
(5)	Any other income arising from conducting petroleum business.

The following are deductible expenses:

(1)	Ordinary and necessary expenses
(2)	Interest remitted and withholding tax paid
(3)	Value of royalty paid to the Thai Government
(4)	Value of special remuneratory benefit tax paid to Thai Government.
(5)	Capital expenditure allowance (in the nature of depreciation)
(6)	Net losses carried forward over the last 10 years
(7)	Bad debts
(8)	Donation not exceeding 1% of profit
(9)	Contribution to provident fund / pension fund

1. Tax based

Tax rate is linked to the status of taxpayer. At present, the tax rates are as follows:

Petroleum Income Tax

(a) Petroleum Income Tax Rates

Act B.E 2514 (status 1)	50%
Act B.E 2522 (status 2)	35%
Act B.E 2532 (status 3)	50%
Disposal of profits	23.08%

(b) Withholding Tax Rates

For transfer of petroleum

Property or rights	50%
(Specifically for income gained from transfer which may be able to specify certain total amount)
Payment of interest	50%
Payment of dividend	23.08%
Payment of interest	15%

Payments for other services Depends on service

1. Tax payment

Petroleum companies are required to submit their annual return within 5 months from the date of closing of their accounting period. Payment of tax has to be made at the time of filing of the return.

Return for profit remittance has to be submitted within 7 days from the date of remittance.

In addition to the annual tax payment, petroleum companies falling under status 3 are required to submit half year return (based on estimate of profit. Under this system, the petroleum company has to estimate its annual profit and pay half of the amount of tax calculated on such basis within two months after the end of first six months of its accounting period. The estimated tax payment is creditable against the annual tax liabilities of the company

3.1.2.2 Local tax

A. PROPERTY TAXES

Property tax is imposed and collected annually. There are two kinds of property tax in

Thailand: House and Land Tax and Local Development Tax. Owners of land and/or buildings

may be subject to either House and Land Tax or Local Development Tax.

1. House and Land Tax

House and Land Tax is imposed on owners of a house, building, structure or land that is rented or otherwise put to commercial use. Taxable property under the House and Land Tax includes houses not occupied by the owner, industrial and commercial buildings and landused in connection therewith. The tax rate is 12.5% of the assessed annual letting value of the property.

2. Local Development Tax

Local Development Tax is imposed on a person who either owns land or possesses land. The tax rate varies according to the estimated land value. An appraisal will be conducted by the local authorities. Allowances are granted for land utilized for personal dwellings, the raising of livestock, and the cultivation of crops by the owner. The extent of the allowances permissible to any land depends on the location of the land.

B. SIGNBOARD TAX

This tax is levied on signboards which show names, symbols or marks of business or advertisements. The rates specified in the Signboard Tax Act are computed based on signboard size and type of display (e.g., language, picture, or sign) shown in signboard, ranging from Baht 3 to Baht 40 per 500 square centimeters (but not less than Baht 200 per signboard).

3.1.3 Direct Tax and Indirect Tax

3.1.3.1 Direct Tax

· Personal Income Tax

· Corporate Income Tax

· Petroleum Income Tax (PT)

(Please see further detail in 3.1.2 for direct tax in Thailand)

1.1.3.2 Indirect Tax

a) Value added tax VAT applies to all retailers, wholesalers, manufacturers, importers, producers and others providing direct services, unless exempt under the Revenue Code. All other firms must register and adopt the VAT system. Firms with turnover not in excess of THB 1.8 million per year are exempt, as are certain other business activities, including the sale and import of raw agricultural products and related goods; the sale and import of newspapers, magazines and textbooks; and basic services, such as health and educational services, domestic transport and the leasing of immovable property. Goods exempt from import duty and destined for export-processing zones are included in this category, along with research and technical services, labor contracts, auditing and legal services. The standard VAT rate is 10%, which has been reduced to 7% until 30 September 2015 and which has two components: the standard 6.3% VAT and the municipal tax of 0.7%. The municipal tax is collected at the provincial level. A 0% VAT applies on a range of activities, including the export of goods and services wholly used outside Thailand. The 0% VAT rate also applies to the export of goods or services, i.e. any services rendered in Thailand and used abroad. VAT is payable by the 15th day of the month following the month in which VAT is collected. If a self-assessment of VAT output is required on the payment of certain income to nonresidents (primarily services or royalties used in Thailand), VAT is payable on the seventh day of the month following the month of the payment. A company that is exempt still must pay VAT on services and products it purchases, but is not entitled to a VAT refund. Such a company does not have to collect VAT on its sales or file monthly VAT forms. An exempt company, however, may do so voluntarily and thus be entitled to a VAT refund if registered for VAT purposes. Certain businesses are excluded from VAT; instead, they pay Specific Business Tax (see under 5.8, below). The VAT registrant may request VAT consolidation of headquarters and branches.

b) Capital tax

None

c) Real estate tax

Real estate tax The municipalities levy a house and land tax and a local development tax. The house and land tax is imposed annually on the owners of a house, building structure or land that is rented or otherwise put to commercial use, at a rate of 12.5% of the actual or assessed annual rental value of the property. The local development tax, also an annual tax, is imposed on the owner of land or the person in possession of the land, with the rate depending on the appraised value of the property, as assessed by the local authorities. The rate typically ranges from 0.25% to 0.95%.

1. Transfer tax Stamp duty may apply (see also Specific Business Tax below).

2. Stamp duty the municipalities levy a house and land tax and a local development tax.

The house and land tax is imposed annually on the owners of a house, building structure or land that is rented or otherwise put to commercial use, at a rate of 12.5% of the actual or assessed annual rental value of the property. The local development tax, also an annual tax, is imposed on the owner of land or the person in possession of the land, with the rate depending on the appraised value of the property, as assessed by the local authorities. The rate typically ranges from 0.25% to 0.95%. Stamp duty applies to any instrument, as set out in the Revenue Code. In the absence of stamp duty, such an instrument is not admissible in court. The stamp duty is necessary for the issuance of new instruments or for additions to the value of an instrument, such as an increase in funds lent under a loan agreement. Stamp duty applies on a range of documents, e.g. 0.1% on leases, the hire of work, transfers of shares/debentures, loans (capped at THB 10,000), etc.

3. Customs and excise duties when a shipment arrives in Thailand, importers are

required to file a goods declaration and supporting documents for the imports with a Customs officer at the port of entry. Imported cargo cannot legally enter into Thailand until after the shipment has arrived within the port of entry, delivery of the merchandise has been authorized by Customs, and applicable taxes and duties have been paid. It is the responsibility of an importer to arrange for examination and release of the imported cargo. In addition, depending on the nature of the imports, and regardless of value, the importers may need to obtain a permit to facilitate clearance of the imports. For certain goods requiring a permit, the relevant permit-issuing agencies should be contacted before importation. The excise tax system has been adjusted to complement the VAT system. For products subject to both taxes, the Revenue Department collects the VAT and the Excise Department collects the excise tax. Products subject to both taxes include cars, perfume, alcoholic beverages, tobacco, playing cards, air conditioners that do not exceed 72,000 BTU per hour and petroleum products. Excise taxes take the form of an ad valorem duty (a percentage of the price of the goods) or a specific charge (based on the quantity or weight of the goods). The excise tax calculation structure is expected to be amended to change the basis from “ex- factory” prices to state-recommended retail prices in the future.

d) Environmental taxes Thailand does not have specific environmental tax, although certain environment-related tax measures take the form of tax privileges, such as additional deductions.

e) Other taxes

· Specific Business Tax Specific Business Tax applies to banking or similar transactions (regardless of whether the business operator is an individual or a company), the sale of immovable property in a profit- seeking manner and to certain businesses, such as factoring, pledges and repos. Specific Business Tax applies to the gross proceeds from the transfer of immovable property at a rate of 3.3% (including a municipal tax of 10%), a withholding tax of 1% of the gross proceeds from the transfer and a transfer fee of 2% of the appraisal value. An exemption from the tax is available in certain cases involving the whole or partial transfer of a business. A 2.75% rate applies to life insurers and pawnbrokers. A 3% rate applies to financial institutions and businesses of a similar nature; however, some transactions (e.g. interest income on debt instruments) are taxed at a rate of 0.1%. A person or entity subject to Specific Business Tax must register within 30 days from the date of commencing business and file a monthly Specific Business Tax return, regardless of whether the business generates income.

· Signboard tax Signboard tax is collected by reference to the size and types of fonts of each signboard. The tax is assessed by the tax officer.

(Please see further detail in 3.1.2 for indirect tax in Thailand)

1.1.4 Thai tax law

3.1.4.1 Internal revenue law

The Revenue Code of Thailand. Translation from Thai script statutory tax laws of Thailand under the REVENUE CODE organizing among others personal income tax, corporate (company) income tax, tax on gifts, income tax, tax liability, tax calculation, VAT (Value Added Tax), stamp duty, withholding tax, tax assessment, appeal, tax rates, tax calculation, return of taxes. Its implementing government body is the

Thailand Revenue Department

The content of internal revenue law of Thailand including general provision and 6 chapters are as follows;

Chapter 1

Revenue Taxes General Provisions

Commission of taxation

Chapter 2

Procedures regarding assessment of tax

Appeal

Chapter 3

Income Tax General Provisions

Chapter 4

Value Added Tax exemption

Tax Payer and Tax Calcultaion

The filing of returns and payment of tax

Tax calculation and Value Added Tax return

Value Added Tax registration

Tax Invoice, Debit Note, Credit Note

Preparation of Report and Keeping of Evidence and Document

Power of Assessment Official

Fine and Surcharge

Punishment

Chapter 5

Specific Business Tax

Chapter 6

Stamp Duty

Payment of Duty

Punishment

(Please see further detail in 3.1.2)

3.1.4.2 Edict/ Ministerial ordinance and notification/ Notification of bureau of internal revenue

Unless the internal revenue law of Thailand mention in 3.1.4.1, there were a lot of notifications issued by other law of Thailand as follows;

R.D.	= Royal Decree
M.R.	= Ministerial Regulation
R.CT.	= Ruling of the Commission of Taxation
N.MF.	= Notification of the Ministry of Finance
N.RD.	= Notification of the Revenue Department
N.DG.	= Notification of the Director-General of Revenue Department
N.DG.IT.	= Notification of the Director-General of Revenue Department on Income Tax
N.DG.VAT	= Notification of the Director-General of Revenue Department on Value Added Tax
N.DG.SBT.	= Notification of the Director-General of Revenue Department on Specific Business Tax
N.DG.SD.	= Notification of the Director-General of Revenue Department on Stamp Duty

The example for revenue law under the power of other law;

i. Royal Decree Regarding Reduction and Exemption from Revenue Taxes (No.405) B.E. 2545

ii. The Ministerial Regulation No. 186 (1991) defines Bad Debts that are eligible to be written off and the procedure to write them off ฃ

iii. MR. No. 310 (B.E. 2558) Issue under the Revenue Code Governing Exemption of Revenue Taxes (Exempt from income for the amount paid to purchase certain type of goods during the 25th to 31st of December 2558)

iv. Royal Decree Issued under the Revenue Code Governing Exemption from Revenue Taxes (No. 596) B.E. 2559 ( issues to exempt income tax, VAT, SBT, and Stamp Duty for donations made to a certain entity in order to support sports.)

v. Ministerial Notification: Currency Exchange as of 31st December B.E. 2558

vi. Notification of the Director-General of Revenue on Income Tax (No. 262) Subject: The rules, procedures, and conditions for the reduction of the rate of income tax of a juristic company or partnership located in the Special Economic Zone, etc.

3.1.4.1 Ruling

In Thailand, both Revenue Department tax auditors and taxpayers use the Tax Ruling system to determine an issue. That is, both Revenue Department tax auditors and taxpayers request the Revenue Department's tax lawyers for a Ruling on an issue and the taxpayer's tax liability for that issue, and the vast majority of both (again) accept the Ruling as a form of "judgment".

International businesses should note that Tax Rulings are not "judgments",

but are in fact the opinions of the Revenue Department tax lawyers ... similar to opinions rendered by lawyers in the private sector. But whilst the legal status of Tax Rulings are only opinions, as they are opinions of Revenue Department tax lawyers (rather than opinions of private sector lawyers), for those cases that you believe the Revenue Department's tax auditors have determined an issue wrongly, they can be very powerful tools to use for defending tax audit investigation cases.

Example for Tax Ruling Thailand for Thailand Export Services VAT Latest Ruling, Tax Advantage Article | October 2012

In April 2012, I alerted foreigners to Thailand's Supreme Court Ruling No 6710/2554, which ruled in favor of the Revenue Department and against a Thailand company providing goods sourcing, inspection and quality assurance services to customers in a foreign country (i.e. export services - services that are performed in Thailand and consumed in a foreign country). That Supreme Court Tax Ruling was publicly criticized by many tax academics and Tax Court Judges. The criticism was over the Supreme Court's interpretation of the consumption part of the 0% VAT rule for export services. And now the Thailand Revenue Department's lawyers have now issued a favorable tax ruling in relation to a Thailand company's export services, as follows:

Tax Ruling No Gor Khor 0702/Por/5147 Dated 21 June 2555

Similarly to the Supreme Court Case, a Thailand company performed the following services in Thailand:

1. Goods sourcing services;

2. Goods inspection services;

3. Goods quality assurance services; and

4. Goods export checking services.

And similarly again to the Supreme Court Case, the Thailand company provided all of the output from its services to customers in a foreign country.

The Thailand Revenue Department's lawyers ruled that as the Thailand

company is sending its services reports to customers outside of Thailand, regardless of whether the customers may use those services reports for subsequent ordering of goods from Thailand or not, the Thailand company has the right to apply the export rate of 0% VAT to the services under Section 80/1(2) of the Revenue Code and the Director-General's Notification on VAT (No 105).

This Tax Ruling seems to be almost opposite the Supreme Court's Ruling, and only time will tell if this latest Tax Ruling is a sign of new Thailand Revenue Department thinking. Even if it isn't, and the Revenue Area audit officers are still challenging you over your export services, you could use this Tax Ruling to defend your position. This Tax Advantage Article is general information only. It should not be used to determine any matter without consulting with an experienced Thailand tax advisor

3.2 Personal Income Tax

Personal Income Tax (PIT) is a direct tax levied on income of a person.

A person means:

· an individual

· an ordinary partnership

· a non-juristic body of person and

· an undivided estate.

Taxable Persons

Taxpayers can be classified into 2 groups include “resident” and “non-resident”.

3.2.1 Judgment of residents and taxable income

3.2.1.1 Definition of residents

“Residents” means any person staying in Thailand for a period or periods aggregating more than 180 days in any tax (calendar) year. A resident of Thailand is liable to pay tax on income from sources in Thailand as well as on the portion of income from foreign sources that is brought into Thailand.

“A non-resident” means any person that has an income from sources in Thailand. A non-resident will be subjected to tax only on income from sources in Thailand.

3.2.1.2 Taxable Income

Taxable income is the amount of income that is used to calculate an individual's or a company's income tax due. Taxable income is generally described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments that are allowable in that tax year.

3.2.1.3 Definition of residents in Japanese tax law

In determining the residency of a company for tax purposes, Japan utilizes the ‘place of head office or main office’ concept, not the ‘effective place of management’ concept. A Japanese company is defined as a company whose head office or main office is located in Japan in the tax law.

3.2.2 Calculation of amount of tax in Thailand

3.2.2.1 Total net income

1. Income chargeable to the PIT is called “assessable income”. The term covers income both in cash and in kind. Therefore, any benefits provided by an employer or other persons, such as a rent-free house or the amount of tax paid by the employer on behalf of the employee, is also treated as assessable income of the employee for the purpose of PIT. Assessable income is divided into 8 categories as follows :

1) income from personal services rendered to employers;

2) income by virtue of jobs, positions or services rendered;

3) income from goodwill, copyright, franchise, other rights, annuity or income in the nature of yearly payments derived from a will or any other juristic Act or judgment of the Court;

4) income in the nature of dividends, interest on deposits with banks in Thailand, shares of profits or other benefits from a juristic company, juristic partnership, or mutual fund, payments received as a result of the reduction of capital, a bonus, an increased capital holdings, gains from amalgamation, acquisition or dissolution of juristic companies or partnerships, and gains from transferring of shares or partnership holdings;

5) income from letting of property and from breaches of contracts, installment sales or hire-purchase contracts;

6) income from liberal professions;

7) income from construction and other contracts of work;

8) income from business, commerce, agriculture, industry, transport or any other activity not specified earlier.

3.2.2.2 Tax deduction

TAXABLE INCOME = Assessable Income - deductions - allowances

Deductions allowed for the calculation of PIT:

Type of Income	Deduction
a. Income from employment	40% but not exceeding 60,000 baht
b. Income received from copyright	40% but not exceeding 60,000 baht
c. Income from letting out of property on hire
1) Building and wharves	30%
2) Agricultural land	20%
3) All other types of land	15%
4) Vehicles	30
5) Any other type of property	10%
d. Income from liberal professions	30% except for the medical profession where 60% is allowed
e. Income derived from contract of work whereby the contractor provides essential materials besides tools	actual expense or 70%
f. Income derived from business, commerce, agriculture, industry, transport, or any other activities not specified in a. to e.	actual expense or 65% - 85% depending on the types of income

Allowances (Exemptions) allowed for the calculation of PIT:

Types of Allowances	Amount
Personal allowance
Single taxpayer	30,000 baht for the taxpayer
Undivided estate	30,000 baht for the taxpayer’s spouse
Non-juristic partnership or body of persons	30,000 baht for each partner but not exceeding 60,000 baht in total
Spouse allowance	30,000 baht
Child allowance (child under 25 years of age and studying at educational institution, or a minor, or an adjusted incompetent or quasi-incompetent person)	15,000 baht each (limited to three children)
Education (additional allowance for child studying in educational institution in Thailand)	2,000 baht each child
Parents allowance	30,000 baht for each of taxpayer’s and spouse’s parents if such parent is above 60 years old and earns less than 30,000 baht
Life insurance premium paid by taxpayer or spouse	Amount actually paid but not exceeding 100,000 baht each
Approved provident fund contributions paid by taxpayer or spouse	Amount actually paid at the rate not more than 15% of wage, but not exceeding 500,000 baht
Long term equity fund	Amount actually paid at the rate not more than 15% of wage, but not exceeding 500,000 baht
Home mortgage interest	Amount actually paid but not exceeding 100,000 baht
Social insurance contributions paid by taxpayer or spouse	Amount actually paid each
Charitable contributions	Amount actually donated but not exceeding 10% of the income after standard deductions and the above allowances

3.2.2.3 Calculation of tax payment

In computing tax liability by using the net income method, a taxpayer has to bring into account all assessable income arising in a tax year. The next step is to deduct from assessable income deductible expenses. Allowances are then to be deducted in accordance with the taxpayer’s circumstances. The last step is to subtract any qualified charitable contribution within the limit specified by law. Then, the tax rates, which are progressive, will be applied to any income left from all deductions.

item 1.Salaries wages etc. (including exempted income) Enter the amount of your salaries and wages that you received in 2012.

item 2. Less exempted income. Enter the amount from B. item 7

item 3. Balance (item 1. minus item 2.) Enter the result of item 1 minus item 2.

item 4. Less expense Enter the result of 40% of item 3 or 60,000 Baht whichever is lower.

item 5.Balance (item 3. minus item 4.) Enter the result of item 3 minus item 4.

item 6. Less allowances. Enter the amount of total allowances that you are entitled to claim

item 7.Balance (item 5. minus item 6.) Enter the result of item 5 minus item 6. A.

item 8. Less contribution to education (twice the amount of actual donation made but not exceeding 10% of item 7.)

If you have donated to support qualified educational projects, you may be entitled to a deduction. The qualified amount shall be filled in this line. A qualified donation to support educational projects is subject to the following conditions:

a. The donation must be used:

· To obtain or construct a building, a land, or a building with land for an educational institution for educational purposes, or

· To obtain educational equipment, textbooks, media, educational technology, and any other equipment as prescribed by the Minister of Finance, or

· To recruit professors, teachers, academic experts, or

· To provide an education scholarship, an invention scholarship, a development scholarship, or a research scholarship for school students, undergraduate students, or graduate students.

b. The donation must be made to:

· Institutions under the royal projects, or

· Institutions founded under the policy to enhance the quality of educational institutions, or

· Institutions for underprivileged or disabled children, or

· Educational institutions listed under the Notification of the Ministry of Education. Please contact your local revenue office or revenue branch office for more information.

A qualified amount of deduction is:

a. Twice the actual amount you donated.

b. The maximum amount is 10% of No. 10 item 3.

If you are claiming for this deduction, evidence from the educational institution(s) must be retained in order to prove your donation

item 9. Balance (of item 7. minus item 8.) Enter the result of item 7 minus item 8.

item 10. Less Charitable Donations (actual amount donated but not exceeding 10% of item 9)

If you have made a charitable donation, you may be entitled to a deduction.

A qualified charitable donation must be made to one of the following institutions:

a. Temples,

b. Thai Red Cross Society,

c. Hospitals (public only),

d. Educational institutions (public or private),

e. Government agencies,

f. Charitable institutions, government employees welfare, or funds, etc. as prescribed by the Ministry of Finance.

The qualified amount is:

· The actual amount you donated.

· The maximum amount is10 % of item 9.

item 11.Net income (item 9. minus item 10.) Enter the result of item 9 minus item 10. This is your ‚net income‛. The progressive tax rate will be applied to the net income to determine your income tax.

item 12. Tax computed from net income from item 11. Enter the result of your tax after the computation of tax on net income

item 13. Less tax exemption for first-time home buyer.

If you have never owned a residence and you bought either a house with land or a condominium for the first time in 2012, you are entitled to a tax exemption subject to following conditions:

a. The price of the first residence you bought is not more than 5,000,000 Baht.

b. You paid for the residence and the residence is transferred during 2012.

c. Your maximum amount of tax exemption is equal to 10% of the purchase price.

d. You have to claim this tax exemption within 5 taxable years from the date of transfer. Additionally, the tax exemption must be divided by 5 and you have to claim the exemption for 5 years.

e. You have never owned a residence before.

f. You must own the residence for at least 5 years counting from the date of transfer.

g. The residence has never been transferred (wholly or partly) to anyone.

h. You have never claimed for:

· A deduction for residence mortgage interest in No.9 item 11.

· An exemption for income from sale of a residence for the purpose of buying a new residence according to Ministerial Regulation No. 241 (B.E.2546).

· An exemption for income paid for a residence according to Ministerial Regulation No. 271 (B.E.2552).

Example: You bought a new condominium worth 3,000,000 Baht as your first residence in 1 December 2012. Your entitlement is 300,000 Baht (10% of 3,000,000 Baht). You can claim a tax exemption of 60,000 Baht for 5 years. You can choose to start claiming for your tax exemption in your tax return for the year 2012 – 2016. If you choose to Page 12 of 35 start claiming for your tax exemption in 2012, the tax exemption of 60,000 Baht must be applied in 2012, 2013, 2014, 2015 and 2016. If in any year, the amount of your tax payable is less than 60,000 Baht, you do not get a refund.

item 14.Balance (tax payable if item 12. more than item 13.) Enter of balance of item 12.minus item 13.only if the result is above 0.

item 15. Withholding tax credit and tax credit for tax paid. When you received income during a tax year, the law requires the payer to withhold income tax for some types of income. In some countries, this is called ‚pay as you go‛ or ‚pay as you earn‛. In Thailand, it is called ‚withholding tax‛. The payer is also required to issue you a withholding tax certificate similar to this picture. If the payer refused to issue a withholding tax certificate, the payer is subject to a criminal penalty. You may have received many withholding tax certificates if you have received income from different payers. You will have to provide documents to the Revenue Department to prove the amount of withholding tax.

item 16. Tax payable or tax overpaid Enter the result of item 14. minus item 15. Then check the box that applies to you. Check the box ‚Payable‛ if the result is higher than zero. Check the box ‚Overpaid‛ if the result is below zero.

item 17. Add additional tax payable Enter the amount (if any).

item 18.Less overpaid tax Enter the amount (if any).

item 19.Less (tax paid in PND91) If this is your additional filing, enter the amount of tax paid from previous filing of PND91

item 20. Additional tax payable/ overpaid tax Check the box that applies to you and enter the amount of additional tax payable or overpaid tax.

item 21 Add surcharge (if any) Enter the amount of surcharge that you are liable to pay (if any).

item 22.Total additional tax payable/ overpaid tax Check the box that applies to you and enter the amount of additional tax payable or overpaid tax. You are now at the final step of tax computation. The amount filled in this line is the actual amount of tax you have to pay or the actual amount of refund you may request.

3.2.3 Declaration and payment

3.2.3.1 Final income tax return

Taxpayer can lodge tax return over the internet using electronic filing, our standard processing time is 15 days. However, your tax return may take longer to process due to various circumstances, the Revenue Department would like to inform as follows.

1. Processing Time

	-	Your tax return is approved by the processing program, the RD will send you refund cheque within 15 days.
	-	Your tax return is not approved by the processing program, the RD will not be able to refund your tax within 15 days as essential documents will be required for further assessment.
	-	You relodged your tax return, the RD will not be able to refund your tax within 15 days.

1. Checking the progress of your tax return online

You can check the progress of your tax return online at www.rd.go.th>> “What’s news”>> “request for PND90, 91 tax refund status” (available only in Thai language)

Taxpayer can cash cheque at Finance Division, 7th floor, 90 Revenue Department Building, Paholyothin 7 Rd., Samsen Nai, Payathai, Bangkok, if you reside in Bangkok. If you reside in other province, please cash you cheque at, Administration Section, Area Revenue Office.

Document required are as follows;

	1)	Personal ID card, or passport with its copy
	2)	letter of establishing non-juristic body of person, in case of non-juristic body of person
	3)	authorization letter (if authorize someone else to perform the request), agent’s personal ID card and its copy.

Types of income (baht)	Withholding tax rate (baht)
1. Employment income	5 - 37 %
2. Rents and prizes	5 %
3. Ship rental charges	1 %
4. Service and professional fees	3 %
5. Public entertainer remuneration - Thai resident - non resident	5 % 5 - 37 %
6. Advertising fees	2 %

3.2.3.3 tax payment

Taxpayer is liable to file Personal Income Tax return and make a payment to the Revenue Department within the last day of March following the taxable year. Taxpayer, who derives income specified in Income from letting out of property on hire / Income from liberal professions or Income derived from business, commerce, agriculture, industry, transport, or any other activities not specified in a. to e. during the first six months of the taxable year is also required to file half - yearly return and make a payment to the Revenue Department within the last day of September of that taxable year. Any withholding tax or half-yearly tax which has been paid to the Revenue Department can be used as a credit against the tax liability at the end of the year.

3.3 Corporate income taxes

Corporate income Tax (CIT) is a direct tax levied on a juristic company or partnership carrying ob business in Thailand or not carrying on business in Thailand but deriving certain types of income from Thailand.

3.3.1 Taxable companies

1.1 A company or a juristic partnership incorporated under Thai law.

1.2 A company or a juristic partnership incorporated under foreign law

1.3 A business operating in a commercial or profitable manner by a foreign government, organization of a foreign government or any other juristic person established under a foreign law.

1.4 Joint venture

3.3.2 Taxable year

3.3.3 calculation of taxable income

3.3.3.1 Tax-free income

The following categories of taxpayers are exempt from CIT:

- Companies granted exemption from tax for a period of time by the Board of Investment under the Investment Promotion Act (1977);

- Specified foundations or organizations; and

- Foreign organizations under mutual agreements or diplomatic

3.3.3.2 Amount of profits/loss

Net losses may be carried forward for five accounting periods for offset against future profits from all sources. There is no provision for loss carry-back. Each company’s losses are dealt with separately. There is no form of group relief or relief by consolidation. A change in shareholding of a company does not affect its tax losses.

3.3.4 Calculation of amount of tax

In calculating CIT, deductible expenses are as follows:

1. Ordinary and necessary expenses. However, the deductible amount of the following expenses is allowed at a special rate:
                 - 200% deduction of Research and Development expense,
                 - 200% deduction of job training expense,
                 - 200% deduction of expenditure on the provision of equipment

for the disabled;
2. Interest, except interest on capital reserves or funds of the company;
3. Taxes, except for Corporate Income Tax and Value Added Tax paid to the Thai government;
4. Net losses carried forward from the last five accounting periods;

5. Bad debts;

6. Wear and tear;
7. Donations of up to 2% of net profits

8. Provident fund contributions;

9. Entertainment expenses up to 0.3% of gross receipt but not exceeding 10 million baht;

10. Further tax deduction for donations made to public education institutions, and also for any expenses used for the maintenance of public parks, public playgrounds, and/or sports grounds;

3.3.5 Method of declaration and payment

3.3.5.1 Interim tax return

The system is one of self-assessment. A company prepares and files its tax returns by the due dates and at the same time pays the taxes calculated to be due. The tax year for a company is its accounting period, which must be of 12months’ duration. However, it may be less than 12 months in the case of the first accounting period after incorporation, the accounting period of dissolution or after approval for a change in the accounting period has been received from the Revenue Department and the Business Development Department. CIT is paid twice in each year. A half-year return must be filed within two months after the end of the first six months of an accounting period. The tax to be paid is computed on one-half of the estimated profit for the full accounting period except for listed companies, banks, certain other financial institutions and other companies under prescribed conditions, where the tax is based on the actual net profit for the first six months. The annual tax return must be filed within 150 days from the closing date of an accounting period and credit is given for the amount of tax paid at the half-year.

In addition, Thai companies can use foreign tax paid on business income or dividends received as a credit against the corporate income tax liability. The credit cannot exceed the amount of Thai tax on the income.

Credit is also given for any Thai withholding tax that has been deducted at source (as mentioned above) and for the half-year tax paid.

Withholding tax on foreign payments

There are two types of final withholding taxes imposed on the remittance of income or profits to foreign companies:

Remittance of income in the form of:

- brokerage, fees for services 15%

- royalties 15%

- interest 15%

- dividends 10%

- capital gains 15%

- rental of property 15%

- liberal professions 15%

**These withholding taxes may be reduced or exempt under double tax treaties.

-Remittance of branch profits is subject to 10 percent withholding tax.

3.4 VAT

Value Added Tax (VAT) has been implemented in Thailand since 1992 replacing Business Tax (BT). VAT is an indirect tax imposed on the value added of each stage of production and distribution.

3.4.1 Taxable companies

Many countries impose corporate tax, also called corporation tax or company tax, on the income or capital of some types of legal entities. A similar tax may be imposed at state or lower levels. The taxes may also be referred to as income tax or capital tax. Entities treated as partnerships are generally not taxed at the entity level. Most countries tax all corporations doing business in the country on income from that country. Many countries tax all income of corporations organized in the country.

Company income subject to tax is often determined much like taxable income for individuals. Generally, the tax is imposed on net profits. In some jurisdictions, rules for taxing companies may differ significantly from rules for taxing individuals. Certain corporate acts, like reorganizations, may not be taxed. Some types of entities may be exempt from tax.

Many countries tax corporate entities on income and also tax the owners when the corporation pays a dividend. Where the owners are taxed, a withholding tax may be imposed. Generally, these taxes on owners are not referred to as corporate tax.

3.4.2 Tax place

A supply that does not fall into any of the specialized categories will fall within the scope of the normal tax point rules. These comprise of what are often referred to as the basic and actual tax points. To apply the actual tax point rules it is first necessary to establish if and when the basic tax point occurred.

In most cases the basic tax point for a supply of goods occurs on their removal. This normally means the time of delivery by the supplier or collection by the buyer. However, some goods are supplied in situ. This will always be the case where the goods themselves are immovable. It also applies where, for example, the goods are the subject of a multiple or chain supply with delivery/collection only occurring in relation, say, to the last supply. An example of this is where goods are supplied via a finance company. For supplies that do not involve removal of the goods, the basic tax point occurs when they are made available to the customer.

The basic tax point for a supply of services is when the services are performed. This normally means the point in time when the services have been completed apart from any outstanding invoicing to the customer. For more information about basic tax points.

3.4.3 Method to calculate VAT

VAT liability = Output Tax - Input Tax

"Output Tax" is a tax collected or collectible by VAT registered person from his customers when goods or services are supplied.

"Input Tax" is a tax charged by another registered person on any purchase of goods or provision of services. The term also includes any tax charged on imported goods.

3.4.4 Tax-free

The distinction between zero-rated and exempted goods or services is that the suppliers of zero-rated goods and services charge VAT at the rate of 0 percent, or in effect no VAT at all, on their output ,and these suppliers are able to claim all input taxes that are paid which are related to the supply. Suppliers of exempt goods and services are not charged VAT on their output, and they cannot claim any input taxes that they have already paid.

3.1.4.1Businesses subject to 0 percent VAT include:

i. export of goods

ii. services rendered in Thailand and utilized outside Thailand in accordance with rules, procedures and conditions prescribed by the Director-General

iii. aircraft or sea-vessels engaging in international transportation

iv. supply of goods and services to government agencies or state-owned enterprises under foreign-aid programs

v. supply of goods and services to the United Nations and its agencies as well as embassies, consulate-general and consulates

vi. supply of goods and services between bonded warehouses or between enterprises located in EPZs.

3.1.4.2VAT Exemptions Businesses exempt from VAT include:

i. small entrepreneurs whose annual turnover is less than 1.8 million baht

ii. sales and imports of unprocessed agricultural products and related goods such as fertilizers, animal feeds, pesticides, etc.

iii. sales and imports of newspapers, magazines, and textbooks

iv. certain basic services such as:

a. transportation (domestic and international transportation by way of land)

b. healthcare services provided by government and private hospitals as well as clinics

c. educational services provided by government and private schools and other recognized educational institutions.

d. goods exempted from import duties under the Industrial Estate law imported into an Export Processing Zones (EPZs) and under Chapter 4 of the Customs Tariff Act.

3.4.5 Tax rate

The standard VAT rate is a flat rate of 7 percent. VAT is levied by the seller on the buyer. The 7 percent VAT rate on gross receipts is effective until 30 September 2012 but could increase to the normal rate of 10 percent thereafter.

3.4.5.1 Tax-free

Zero Percent Rate - Certain activities are liable to VAT at the rate of zero percent. Those activities include:

• export of goods;

• services rendered in Thailand and utilized outside Thailand in accordance with rule, procedure and condition prescribed by the Director- General;

• aircraft or sea-vessels engaging in international transportation;

• supply of goods and services to government agencies or state-owned enterprises under foreign-aid program;

• supply of goods and services to the United Nations and its agencies as well as embassies, consulate-general and consulates;

• supply of goods and services between bonded warehouses or between enterprises located in EPZs.

3.4.6 Procedures of declaration and payment

All registered VAT operators are required to account for VAT return forms on a monthly basis. Any VAT due is liable to be paid on or before the 15th day of the following month and registrants are also required to file VAT returns for self-assessed VAT within 30 days from the date the tax liability arises.

All registered VAT operators have to show below detail on a tax invoice

i. name, address, tax payer identification number

ii. name, address of purchaser

iii. serial number of invoice

iv. name, type, quantity and value of goods, services

v. VAT computed and shown separately

vi. date of issue.

3.4.7 Tax Invoice

Thailand VAT – Tax Invoice

If your business in Thailand is registered in the VAT system, you and your Thai accountant need to pay attention to the tax invoice you receive from vendors.

When you buy goods from someone who is also registered in the VAT system, they need to issue a tax invoice right when the goods are delivered. The “tax invoice” may or may not be on the same paper as “invoice” or “delivery note” or “receipt”. If they are not registered in the VAT system, they cannot issue a tax invoice and must not collect VAT from you.

When you buy services, the vendors do not need to issue a tax invoice until you pay them. If you get a credit term on the transaction, they may send you an “invoice” to let you know how much you owe them. When they get paid, they need to issue a receipt and a tax invoice, which could be on the same paper.

A tax invoice must at least contain the following particulars-

(1) the word “tax invoice” at a prominent place;

(2) the name, address and taxpayer identification number of the business issuing the tax invoice;

(3) the name and address of the purchaser of goods or service;

(4) serial number of the tax invoice;

(5) description, type, category, quantity and value of goods or services

(6) the amount of value added tax calculated on the value of goods or services which is clearly separated from the value of goods or services;

(7) the date of issuance;

(8) any other particulars as prescribed by the Director-General of the Revenue Department.

Please make sure there is no correction made anywhere in the tax invoice even if someone has initialed it. THAI ACCOUNTANT recommends you ask the issuer to issue a new one for you if there are any mistakes on the tax invoice.

3.5 Other taxes

3.5.1 Special business tax

Businesses in Thailand that provide goods and services are generally subject to the Value Added Tax (VAT), which is an indirect tax and is levied against the value received or receivable from the supply of goods and services. However, certain types of businesses under the Revenue Code are subject to the Specific Business Tax (SBT), rather than the VAT. The SBT is imposed on certain businesses, such as financial services, where the difference between the production costs and the value added are not as clear as in other types of businesses. The SBT and VAT were both mandated in 1992 to replace the older Business Tax.

Section 91/5 of the Revenue Code outlines the tax bases for the SBT, which differs depending on the type of business and may be either: gross receipts, interests, discounts, service fees, other fees, profits from buying and selling bills of exchange and foreign currency. The tax applies to all receivables that result from business activity, whether derived from within Thailand or outside the country.

Section 91/2 subjects the following types of businesses are subject to the SBT:

Type of business according to Section 91/2	Tax bases according to Section 91/5	Tax rate according to Section 91/6
Commercial Banking	(a) Interest, discounts, fees, services, gross profits from buying, selling or receiving bills of exchange or debt notes	(a) 3.0%
	(b) gross profits from exchanging, buying and selling foreign currency, from issuing any bills of exchange or debt notes, and from transferring money to a foreign country	(b) 3.0%
Finance, securities and credit foncier	(a) Interest, discounts, fees, services, gross profits from buying, selling or receiving bills of exchange or debt notes	(a) 3.0%
	(b) gross profits from exchanging, buying and selling foreign currency, from issuing any bills of exchange or debt notes, and from transferring money to a foreign country	(b) 3.0%
Life insurance	Interests, fees, services	2.5%
Pawnshop business	Interests, fees, and money, assets, compensation, or any valuable interest received or receivable from selling overdue pawned property	2.5%
Business with regular transactions similar to commercial banking	(a) Interest, discounts, fees, services, gross profits from buying, selling or receiving bills of exchange or debt notes	(a) 3.0%
	(b) gross profits from exchanging, buying and selling foreign currency, from issuing any bills of exchange or debt notes, and from transferring money to a foreign country	(b) 3.0%
Sale of immovable property or real estate in a commercial or profitable manner	Gross receipts	3.0%
Sale of securities in a securities market	Gross receipts	0.1% Currently under exemption
Any other business prescribed by royal decree	According to royal decree	According to royal decree

There is a municipality tax of 10% imposed in addition to SBT.

3.5.2 Petroleum income tax

a) if the company takes any day as the closing date of the first accounting period:

b) if the company ceases its petroleum business, the date of dissolution shall be the closing date of the accounting period:

c) if the company changes the closing date of an accounting period with the approval of the Director-General.

§ Tax Base

The term ‘petroleum taxpayer’ covers anybody who:

(1) holds a concession under petroleum law or has a joint interest in it; or

(2) purchases crude oil produced by any concessionaire, all of which is intended for export.

The important differences in tax calculation/remittance between the three versions of the Act are as follows:

Act 2514 (status 1)	Only annual return. No need for half year return. Interest not allowed as expense. Royalty allowed as tax credit. No levy of special remuneratory benefit tax. High tax rate of 50%
Act 2522 (status 2)	Only annual return. No need for half year return. Interest allowed as expense. (but a high withholding tax of 50% on interest paid is levied. Royalty allowed as expense. No levy of special remuneratory benefit tax. Low tax rate of 35% High profit remittance tax of 23.08%
Act 2532 (status 3)	Annual and half yearly returns required. Interest not allowed as expense. Royalty allowed as expense. Additional levy of special remuneratory benefit tax. High tax rate of 50%

While calculating net profit, following items are included as revenue:

(1) Gross Income from sale of petroleum;

(2) Value of petroleum disposed of;

(3) Value of petroleum delivered as payment of royalty in kind;

(4) Gross income arising from a transfer of any property or right related to petroleum business, if the total amount of such gross income is definitely determinable;

(5) Any other income arising from conducting petroleum business.

The following are deductible expenses:

(1) Ordinary and necessary expenses

(2) Interest remitted and withholding tax paid

(3) Value of royalty paid to the Thai Government

(4) Value of special remuneratory benefit tax paid to Thai Government.

(5) Capital expenditure allowance (in the nature of depreciation)

(6) Net losses carried forward over the last 10 years

(7) Bad debts

(8) Donation not exceeding 1% of profit

(9) Contribution to provident fund / pension fund

§ Tax rates

Tax rate is linked to the status of taxpayer. At present, the tax rates are as follows:

Petroleum Income Tax

(a) Petroleum Income Tax Rates

Act B.E 2514 (status 1) 50%

Act B.E 2522 (status 2) 35%

Act B.E 2532 (status 3) 50%

Disposal of profits 23.08%

(b) Withholding Tax Rates

For transfer of petroleum

Property or rights 50% (Specifically for income gained from transfer which may be able to specify certain total amount)

Payment of interest 50%

Payment of dividend 23.08%

Payment of interest 15%

Payments for other services Depends on service

§ Tax payment

Petroleum companies are required to submit their annual return within 5 months from the date of closing of their accounting period. Payment of tax has to be made at the time of filing of the return.

Return for profit remittance has to be submitted within 7 days from the date of remittance.

3.5.3 Stamp tax

Nature of Instrument/Transaction	Stamp Duty
1. Rental of land, building, other construction or floating house For every 1,000 Baht or fraction thereof of the rent or key money or both for the entire lease period	1 Baht
2. Transfer of share, debenture, bond and certificate of debt issued by any company, association, body of persons or organization. For every 1,000 Baht or fraction thereof of the paid-up value of shares, or of the nominal value of the instrument, whichever is greater.	1 Baht
3. Hire-purchase of property. For every 1,000 baht or fraction thereof of the total value	1 Baht
4. Hire of work For every 1,000 Baht or fraction thereof of the remuneration prescribed.	1 Baht
5. Loan of money or agreement for bank overdraft For every 2,000 Baht or fraction thereof of the total amount of loan or the amount of bank overdraft agreed upon. Duty on the instrument of this nature calculating into an amount exceeding 10,000 Baht shall be payable in the amount of 10,000 Baht.	1 Baht
6. Insurance policy (a) Insurance policy against loss For every 250 baht or fraction thereof of the insurance premium. (b) Life insurance policy For every 2,000 baht or fraction thereof of the amount insured. (c) Any other insurance policy For every 2,000 baht or fraction thereof of the amount insured. (d) Annuity policy For every 2,000 baht or fraction thereof of the principal amount, or, if there is no principal amount, for every 2,000 baht or fraction thereof of 33 1/3 times the annual income. (e)Insurance policy where reinsurance is made by an insurer to another person. (f)Renewal of insurance policy	1 Baht 1 Baht 1 Baht 1 Baht 1 Baht 1 Baht Half the rate for the original policy
7. Authorization letter i.e., a letter appointing an agent, which is not in the form of instrument or contract including a letter appointing arbitrators: (a) authorizing one or more persons to perform an act once only. (b) authorizing one or more persons to jointly perform acts more than once. (c) authorizing to perform acts more than once by authorizing several persons to perform acts separately; the instrument will be charged on the basis of each individual who is authorized.	10 Baht 30 Baht 30 Baht
8. Proxy letter for voting at a meeting of a company (a) Authorized for one meeting only (b) Authorized for more than one meeting	20 Baht 100 Baht
9. (1) Bill of exchange or similar instrument used like bill of exchange for each bill or instrument (2) Promissory note or similar instrument used like promissory note for each note or instrument	3 Baht 3 Baht
10. Bill of lading	2 Baht
11. (1) Share or debenture certificate, or certificate of debt issued by any company, association, body of persons or organization (2) Bond of any government sold in Thailand For every 100 baht or fraction thereof.	5 Baht 1 Baht
12. Cheque or any written order used in lieu of cheque for each instrument	3 Baht
13. Receipt for interest bearing fixed deposit in a bank	5 Baht
14. Letter of credit (a) Issued in Thailand - For value less than 10,000 Baht - For value of 10,000 Baht or over (b) Issued abroad and payable in Thailand for each payment	20 Baht 30 Baht 20 Baht
15. Traveler’s cheque (a) For each cheque issued in Thailand (b) For each cheque issued abroad but payable in Thailand	3 Baht 3 Baht
16. Each goods’ receipt issued in connection with carriage of goods by waterway, land and air, namely, an instrument signed by an official or cargo master of a transport vehicle which carries goods as specified in that receipt upon issuing the bill of lading	1 Baht
17. Guarantee (a) For an unlimited amount of money (b) For an amount exceeding 1,000 baht (c) For an amount exceeding1,000 baht but not exceeding 10,000 baht (d) For an amount exceeding 10,000 baht	10 Baht 1 Baht 5 Baht 10 Baht
18. Pawn broking For every 2,000 baht or fraction thereof of the debt. If the pawn broking does not limit the amount of debt.	1 Baht 1 Baht
19. Warehouse receipt	1 Baht
20. Delivery order	1 Baht
21. Agency (a) specific authorization (b) general authorization	10 Baht 30 Bah
22. Decision given by an arbitrator (a)In the case where the dispute is concerned with the amount of money or price for every 1,000 baht or fraction thereof (b)In the case where no amount of money or price is mentioned.	1 Baht 10 Baht
23. Duplicate or counterfoil of an instrument, namely, an instrument having the same contents as the original document or contract and signed by the person executing the instrument in the same manner as the original. (a)If the duty payable for the original does not exceed 5 baht. (b)If the duty exceeds 5 baht.	1 Baht 5 Baht
24. Memorandum of association of a limited company submitted to the registrar.	200 Baht
25. Articles of association of a limited company submitted to the registrar.	200 Baht
26. New articles of association, copy of amended memorandum of association or articles of association submitted to the registrar.	50 Baht
27. Partnership contract (a) Contract on the establishment of a partnership (b) Amendment of the contract on the establishment of a partnership	100 Baht 50 Baht
28. Receipt only as specified below: (a) Receipt issued for government lottery prizes; (b) Receipt issued in connection with a transfer of, or creation of any right in, an immovable property, if the juristic act which gives rise to such receipt is registered under the law; (c) Receipt issued in connection with a sale, sale with right of redemption, hire-purchase or transfer of ownership in a vehicle, only if the vehicle is registered under the law governing such vehicle. If the receipt under (a) (b) (c) has an amount of 200 Baht or more: for every 200 Baht or fraction thereof.	1 Baht

3.5.4 Commodity tax

In the globalization of business, increased taxation through value added taxes (VAT: in Canada, GST/HST/QST) represents the largest tax program of the last 50 years. The VAT was introduced in over 150 countries and now represents 20% of the tax revenues collected worldwide.

3.5.5 Custom Duty

Customs duty is mainly imposed on imported and selected exported goods specified by the Law on Customs Tariff. Customs duty is levied in accordance with the Harmonized Commodity Description and Coding System or Harmonized System. Most tariffs are ad valorem, which is a duty laid upon goods at a certain rate of their value. In certain cases, however, both ad valorem and a specific rate (e.g. a rate charged on a unit of goods) are given, and the tariff that gives the most revenue will apply. In general, the invoice price is the basis for computation of duty and normally applied to cost, insurance and freight (CIF) value for import and free on board (FOB) for export.

Customs duty is levied in accordance with the Harmonized Commodity Description and Coding System or Harmonized System. Thailand has adopted the Protocol Governing the Implementation of the ASEAN Harmonized Tariff Nomenclature (the AHTN Protocol) to harmonize the tariff nomenclature at the eight-digit level.

3.6 Local tax

3.6.1 Land tax and house tax

A person who leases out land, or land and buildings, including condominiums, is subject to Land and House Tax at the rate of 12.5% of the actual or assessed rental value, whichever is higher. Owner occupied factories and commercial buildings are assessed for this tax at the same rate, according to the assessed rental value.

New property tax: The Government’s proposals are that the two taxes above would be replaced by a new property tax assessed on different types of land, as follows:

· Agricultural land: 0.05% of land value

· Residential land: 0.1% of value of land and building

· Other land and buildings: 0.5% of value.

Where land has not been used for three years, it will be subject to double the usual tax rate, but not exceeding 2%.

The tax rates will be revised every four years. There will be no tax collected during the first two years of operation, since valuation of land on a nationwide basis will not have been completed. After that, tax will be collected annually on a sliding scale. In year three 25% of tax will be collected, with 50% in year four, 75% in year five and the full amount after that.

Exemptions from property tax: Exemptions from tax liability will be discussed further by the Cabinet. It has been suggested that the following should be tax exempt:

· small parcels of land of 50 square wah or less, and

· condominium units of no more than 30, or 50 square metres.

Land Bank Fund: It is also envisaged that the government would set up a Land Bank Fund, which would buy land from those who may not want to hold a large amount of land. The Fund would redistribute the land to the poor. Part of the property tax collected would be used to finance the land bank scheme.

Reform of the taxes levied on land and buildings has been under consideration for many years. We will have to wait and see how the Cabinet considers these proposals, particularly the tax rates to be imposed and what property will be included or excluded from the tax. One suspects that the proposals will be particularly unpopular with developers who have accumulated large land banks at cheap prices for future development, and those who inherit land from their parents/other family members. We shall have to wait and see.

3.6.2 Tax on local development

Local development land tax: Local development land tax is imposed on owners or possessors of land, according to the size of the land and its officially assessed value. Land subject to land and house tax, small parcels of land for residential and agricultural purposes, and certain other categories of land, are exempt from this tax.

3.6.3 Tax on signboard

This tax may be imposed at various rates per square meter (depending on the language) on any signs or billboards which display a name, trademark or product for the purpose of advertising or providing information on businesses.

The local authorities which administer this tax are the 76 provinces, the Bangkok Metropolitan Authority and the City of Pattaya.

Withholding System

4.1 Overview of withholding system in Thailand

Withholding tax (“WHT”) is a deduction from payments made to suppliers who provide a service. Whether WHT is applicable and what rate to deduct depends on the nature of the service provided. WHT also applies to interest and dividend payments.

Remittances made to overseas suppliers may also incur a WHT deduction. Countries with a double tax treaty with Thailand have different applicable rates.

The following will require the deduction of WHT:

1. Expenses greater than 1,000 Baht; and

2. Expenses less than 1,000 Baht for which a long term contract is in place (e.g. telephone)

However, no deduction is made for payments to non-taxpayers (e.g. the Government, BOI promoted company).

4.2 Taxable income and tax rate of withholding taxes

· Common cooperate withholding tax deduction rates are as follows:

Types of income	Withholding tax rate
1.Dividends	10 %
2.Interest1	1 %
3.Royalties2	3%
4. Advertising Fees	2%
5. Service and professional fees	3 % if paid to Thai company or foreign company having permanent branch in Thailand; 5% if paid to foreign company not having permanent branch in Thailand
6. Prizes	5%

Notes:

1. Tax will be withheld on interest paid to associations or foundations at the rate of 10%.

Royalties paid to associations or foundations are subject to 10% withholding tax rate.
Government agencies are required to withhold tax at the rate of 1% on all types of income paid to companies.

· Common personal withholding tax deduction rates are as follows:

Types of income (baht)	Withholding tax rate (baht)
1. Employment income (progress rate)	5 - 35 %
2. Rents and prizes	5 %
3. Ship rental charges	1 %
4. Service and professional fees	3 %
5. Public entertainer remuneration - Thai resident - non resident	5 % 5 - 35 %
6. Advertising fees	2 %

4.2.1 Domestic Business

For cooperate, certain types of income paid to companies are subject to withholding tax at source. The withholding tax rates depend on the types of income and the tax status of the recipient. The payer of income is required to file the return (Form CIT 53) and submit the amount of tax withheld to the District Revenue Offices within seven days of the following month in which the payment is made. The tax withheld will be credited against final tax liability of the taxpayer. The following are the withholding tax rates on some important types of income. (Please see the rate in no. 4.2)

For individuals, certain categories of income, the payer of income has to withhold tax at source, file tax return and submit the amount of tax withheld to the District Revenue Office. The tax withheld shall then be credited against tax liability of a taxpayer at the time of filing PIT return. The following are the withholding tax rates on some categories of income. (Please see the rate in no. 4.2)

4.2.1.1 Withholding Taxes on wage

Personal income tax rates applicable to taxable income are as follows

Tax rates of the Personal Income Tax:

Taxable Income (baht)	Tax Rate (%)
0-150,000	Exempt
more than 150,000 but less than 300,000	5
more than 300,000 but less than 500,000	10
more than 500,000 but less than 750,000	15
more than 750,000 but less than 1,000,000	20
more than 1,000,000 but less than 2,000,000	25
more than 2,000,000 but less than 4,000,000	30
Over 4,000,000	35

4.2.2 International Business

Type of Income	Rate
Remittance of profits	10%
Dividends	10%
Other income such as interests, royalties, capital gains, rents and professional fees	15%

A foreign company carrying on business in Thailand, whether setting up a branch or an office must apply for tax identification number from the Revenue Department. An application form (Lor Por 10.3) together with other relevent documents i.e. a copy of a company’s registration license, house registration, etc. shall be submitted to the Area Revenue Office within 60 days for the date of registration or operation.

Currently, Thailand has concluded 57 tax treaty agreements : : Armenia, Australia, Austria, Bangladesh, Bahrain, Belgium, Bulgaria, Canada, China P.R., Cyprus, Czech Republic, Denmark, Finland, France, Germany, Hong Kong, Hungary, India, Indonesia, Israel, Italy, Japan, Korea, Laos, Luxembourg, Malaysia, Mauritius, Nepal, the Netherlands, New Zealand, Norway, Oman, Pakistan, the Philippines, Poland, Romania, Seychelles, Singapore, Slovenia, South Africa, Spain, Srilanka, Sweden, Switzerland, Turkey, Ukraine, United Arab Emirates, United Kingdom of Great Britain and Northern Ireland, United States of America, Uzbekistan, Vietnam, Kuwait, Russia, Chile, Burma, Taiwan, and Estonia

4.2.3 Procedures of withholding

4.2.3.1 Procedures of declaration and payment

For cooperate, Thai and foreign companies carrying on business in Thailand are required to file their tax returns (Form CIT 50) within one hundred and fifty (150) days from the closing date of their accounting periods. Tax payment must be submitted together with the tax returns.

Any company disposing funds representing profits out of Thailand is also required to pay tax on the sum so disposed within seven days from the disposal date (Form CIT 54). In addition to the annual tax payment, any company subject to CIT on net profits is also required to make tax prepayment (Form CIT 51). A company is obliged to estimate its annual net profit as well as its tax liability and pay half of the estimated tax amount within two months after the end of the first six months of its accounting period. The prepaid tax is creditable against its annual tax liability. As regards to income paid to foreign company not carrying on business in Thailand, the foreign company is subject to tax at a flat rate in which the payer shall withhold tax at source at the time of payment. The payer must file the return (Form CIT 54) and make the payment to the Revenue Department within seven days of the following month in which the payment is made.

For individual, taxpayer is liable to file Personal Income Tax return and make a payment to the Revenue Department within the last day of March following the taxable year. Taxpayer, who derives income specified in Income from letting out of property on hire, liberal professions or income derived from business, commerce, agriculture, industry, transport during the first six months of the taxable year is also required to file half - yearly return and make a payment to the Revenue Department within the last day of September of that taxable year. Any withholding tax or half-yearly tax which has been paid to the Revenue Department can be used as a credit against the tax liability at the end of the year.

4.2.3.2 Provision of withholding tax receipt

For taxes collectible under this Revenue Code, a Royal Decree may be issued for the following purposes:

1. to reduce or exempt tax as suitable to circumstances, nature of business, or local condition;

2. to exempt tax to persons or international organizations under the commitment between Thailand and United Nations, under international laws, under Conventions, or under reciprocal basis;

3. to exempt tax to government, state enterprise, Tessaban (municipal), Sukapiban (municipal), religious body or public charitable organization;

The reduction or exemption under (1), (2) and (3) may be amended or revoked by issuing a Royal Decree.

If the following official considers that an accused shall not be imprisoned or prosecuted, he shall be empowered to impose fine in the following offenses:

1. Offense subject to fine only, or fine or imprisonment not exceeding six months, or both with an imprisonment not exceeding six month, occurred in Bangkok Metropolitan area shall be within the power of the Director-General. If it occurs in other provinces, it shall be within the power of the Provincial Governor.

2. Offense subject to fine or imprisonment exceeding six months but not exceeding one year or both with an imprisonment exceeding six months but not exceeding one year, shall be within the power of a Committee comprising the Director-General, the Director-General of department of Local Administration, and the Commissioner General of the Royal Thai Police or his authorized representative.

If an accused pays the fine in full within the time given, it shall be deemed that he shall not be further prosecuted for that case. If the empowered person under paragraph 1 considers not to exercise such power, or the accused does not comply with the order to pay fine, or the accused agrees to pay fine but does not do so within the time given, the accused shall be further prosecuted. In this case he shall not be allowed to pay fine in accordance with other laws.

Any person liable to surcharge in accordance with the Revenue Code, agrees and pays such surcharge in accordance with a Ministerial Regulation, it shall be deemed that such person is no longer liable to pay such surcharge. In the case where the provisions of the Revenue Code prescribes that a person shall pay tax at an Amphur office, the Minister may publish in the Government Gazette provisions to pay tax at another place. In such a case, the tax payment is deemed to be complete upon the receipt of the tax receipt signed by the Head of such office.

In the case where there is to believe that there is tax evasion, the Director-General shall have the power to enter or issue a written order to Revenue officials to enter any places or vehicles in order to search, seizure or attach books of account, documents or other evidences related or believed to be related to tax evasion, throughout Thailand. In any other province apart from Bangkok, the Provincial Governor or Chief of Regional Revenue Office shall have the power of the Director-General. However, in exercising the power of officer shall be done during the hours between sunrise and sunset, or during business hours of an entrepreneur.

If books of account, documents and other evidences related or presumed to be related to tax payable are in foreign languages, an assessment official or official may order a responsible person to translate them into Thai language within a reasonable period of time. For the purpose of collecting taxes in accordance with the Revenue Code, the accounts examination and certification shall be done only by person who has obtained a license from the Director-General.

A person who wishes to apply for the license shall possess the qualification and comply with the regulations prescribed by the Director-General with the approval of the Minister. If a person obtained such license violates the regulations as prescribed by the Director- General, the Director-General may terminate such license.

The provisions of this Section may be in force in any province as the Director-General shall announce with an approval of the Minister. The announcement shall be published in the Government Gazette. With regard to deadline for filing tax returns or other items, for appeal or for paying taxes as prescribed in the Revenue Code, if the liable person is not in Thailand or due to a cause of necessity fails to act within the deadline, it may be extended or postponed as necessary where the Director-General deems appropriate.

A deadline prescribed in the Revenue Code may be extended or postponed as necessary, where the Minister deems appropriate. Any person intentionally does not accommodate or obstruct officials exercising his powers shall be liable to fine not exceeding 5,000 Baht or an imprisonment not exceeding 1 month, or both.

Any person not complying with orders of an assessment official or official in accordance with Section 3 Sex shall be liable to fine not exceeding 5,000 Baht. For the purpose of collecting taxes in accordance with the Revenue Code, the Director-General shall have the power to prescribe that taxpayers and the payer of income shall obtain and use Tax Identification Number in complying with the Revenue Code in accordance with rules and procedures prescribed by the Director-General with the Minister’s approval.

Requirement for Persons Having Duty to Pay Personal Income Tax, Companies or Juristic Partnerships, and Income Payers Having Duty to Withhold Tax at Source to Have and Use Identification Number in the Compliance with the Revenue Code. A person violating or failing to complying with the Director-General’s announcement shall be subject to fine not exceeding 2,000 Baht.

For the purpose of tax collection, a Director-General shall be empowered to order the payer of assessable income, who does not have to withhold tax, to withhold tax at source in accordance with rules, conditions and procedures prescribed by the Ministerial Regulations. In the case where withholding tax is required by the Revenue Code, a person required to withhold tax shall withhold tax at source and remit to the Revenue Department whether or not the payment of assessable income is made by Court order, laws or any other reasons.

4.2.3.3 Annual report on withholding

The WHT deducted is paid to the Revenue Department (“RD”) within the 7th day of the following month in which the payment was made. E.g. a payment made on 27th July 2015 to a supplier will require the WHT deducted to be paid to the RD by the 7th August 2015.

The Revenue Department has announced that companies registered for e-filing with have an extra eight days to file all tax returns. This incentive will run until January 2017.

4.2.3.4 Procedures of return

The refund of tax and tax withheld and remitted in an amount in excess of what should have been remitted or without a duty to pay, a person entitled for the refund shall submit the request within 3 years from the due date of the filing of tax return, except in the following cases:

1. in the case where an entitled person has filed a tax return after the due date or has filed within the due date that the Minister or Director-General had extended or postponed, an entitled person shall submit a request for tax refund within 3 years after the filing date.

2. in the case where an entitled person has appealed in accordance with the provisions under this Chapter or has a case in Court, an entitled person shall submit a request for tax refund within 3 years from the date of receiving the appealed decision in writing or from the date of receiving the final court decision, as the case may be.

The refund requested under this Section shall be in accordance with the form prescribed by the Director-General and an entitled person shall submit the request at Amphur official where he is a resident or at any other place as prescribed by the Director-General.

4.2.4 Penalty regulation

The surcharge for late submission is:

· 100 baht within the first 7 days

· 200 baht after 7 days

An additional penalty of 1.5% of the outstanding amount calculated monthly.

Tax Investigation

5.1 Overview of tax investigation

Dealing with revenue officers’ tax investigations or any tax dispute e.g. tax refund, tax assessment, etc. may be a time-consuming and very costly procedure for the business. In addition, the statement given to the revenue officer can be crucial for their tax assessment and could be used in the tax court. Therefore, having a professional in liaison with revenue officers or with accountants and auditors could be a wise move in order to obtain the best result in dealing with tax investigation/tax disputes.

The Company need to get ready for tax Investigation as follows;

·   Liaison with revenue officers, accountants and auditors;

·   Preparation of any required/supporting documents including explanation letters for submission to revenue officers;

·   Research and advice on certain tax issues in relation to the tax investigation/tax dispute; and

·   Preparation of tax appeals to the Board of Taxation/tax court including liaison with the tax litigator (as the case may be) in the event of a tax dispute.

5.1.1 Hearing of national tax officials

There are three main types of tax investigations (tax audits) conducted by Thailand Revenue Department tax audit officers, as follows:

·         Business Operation Visit ("BOV") Investigation, Routine investigation conducted under Section 88/3 of the Revenue Code "Reviewing" tax compliance and correct payments of all taxes Under Section 88/3, the Revenue Department audit officers have the power to enter a place of business or other place (at any time during sunrise and sunset or the working hours of the place of business) to determine whether the business has complied with the provisions of the Revenue Code, the power to order the owner of the business or other person present to do whatever is necessary for an investigation of the business, and the power to seize business documents for investigation.

·         Specific Issue Investigation, Investigation of tax refunds conducted under Section 27 Quarter of the Revenue Code "Inspecting" the tax refund and all other taxes for the fiscal year of the tax refund Under Section 27 Quarter, the Revenue Department audit officers have the power to issue a written notice to a person claiming a tax refund or other person involved, requiring him or her to appear for giving statements and relevant documents and records for inspection, as may be deemed proper.

·         Summons Investigation, Investigation of all tax types conducted under Sections 19, 23, 88/4, 91/21 and 123 of the Revenue Code "Investigating" all of the tax payments of the company for the previous 2 fiscal years, or for the previous 5 fiscal years when the Revenue audit officers have evidence of or suspicion of tax evasion. Summons Investigations are conducted when the Revenue Department audit officers have reason to believe that false or inadequate information has been given in a tax return or that tax returns have not been filed, for which the Revenue Department audit officers have power to issue a summons requiring a taxpayer or witness to appear for giving statements and for giving accounting records, documents and other evidence for investigation, for the previous two fiscal years, or the previous five fiscal years when a Revenue Department audit officer has evidence or reason to believe that a taxpayer intentionally evaded tax.

5.1.2 Tax investigation with summons

According to section 19 of Thai Revenue Law, unless stated otherwise, in the case where an assessment official has a reasonable cause to believe that any person has filed a false or incomplete tax return, the assessment official shall have the power to issue a summons call upon that tax return filer for interrogation and issue a summons call upon a witness and order that tax return filer or witness to show accounts, documents or any other evidence but he shall give at least 7 days in advance from the date of delivery of summons. Nevertheless, the summons must be issued within 2 years from the date of tax return filing whether or not the filing was done within the time limit prescribed by law or the time extended by the Minister or Director-General, whichever is the later date.

Except there is evidence or reasonable doubt that a tax return filer has intention to evade tax or in the case necessary for the purpose of tax refund, a Director-General may extend the time for the issuance of such summons in excess of 2 years but not exceeding 5 years from the date of tax return filing. However, the extension of time limit for the purpose of tax refund shall not exceed the time limit for refund.

According to section 8 of Thai Revenue Law says that a summons is a notification to pay tax or any other letter issued to any person in accordance with this Title, shall be sent by registered mail or delivered by a revenue official at a place of domicile or residence or office of such person during the sunrise and sunset or during office hours of such person. If a recipient cannot be found at a place of domicile or residence or office of the recipient, it shall be delivered to any person who resides or works in such house or office.

In the case where it cannot be delivered under the provisions of paragraph 1 or that person has left Thailand, it shall be posted at a prominent place of his residence, office or house where his name is currently in the record under the law regarding house registration or published a brief description in a newspaper regularly sold in that area.

According to section 12 of Thai Revenue Law, Tax payable or remittable under this Title, when it is due but not paid or remitted shall be deemed as tax arrears.
In order to recover tax arrears, the Director-General shall have the power to seize or attach and sale by auction assets of a person liable to pay or remit tax throughout Thailand without the Court summons or order. The Director-General may delegate such power to a Deputy Director General or Chief of Regional Revenue Office.

In any other province apart from Bangkok, the Provincial governor or Chief of Amphur shall have the power of the Director-General under paragraph 2 within the province or region. However, for Chief of Amphur, he shall have the power to order sale by auction upon permission from the Provincial governor. The procedure for seizure and sale by auction shall be in accordance with the Civil Procedures Code mutatis mutandis. For an attachment, the regulation prescribed by the Director-General with an approval from the Minister shall be followed.

Money received from sale by auction shall be deducted fees, expenses incurred from seizure and sale by auction, and tax arrears. The remaining shall be returned to the owner of the assets. A person liable to pay tax under paragraph 2 shall include a partner with unlimited liability in a juristic partnership.

According to section Section 12 Bis and Ter (3) of Thai Revenue Law, (20 Once the seizure or attachment order under Section 12 is issued, no one shall destroy, remove, hide or transfer the seized or attached assets to other persons. For the purpose of Section 12, an authorized person or Chief of Area Revenue Office shall have the power to:

(1) issue summons to a person liable to tax arrears or any person reasonably believed to be beneficial for collection of tax arrears to give evidence,
(2) order a person in (1) to bring books of account, documents or other evidence as necessary for collection of tax arrears for inspection,

(3) order in writing to a revenue official to search or seize accounts, documents or other evidence of a person in (1).

The procedures in (1) and (2) shall be preceded after at least 7 days from the date that a summons or an order is received. The order and procedure in (3) shall be in accordance with the regulation as prescribed by the Director-General.

5.1.3 Tax investigation with return for refund

According to section 17 of Thai Revenue Law, In relation to tax return filing, it shall be filed within the time limit specified in the Chapters regarding taxes and in accordance with the form prescribed by the Director-General.

If the Director-General requires annual reports, or financial statements or other accounts together with tax return, he shall have the power to order so. The Director-General shall have the power to order a taxpayer to keep special book of account and to fill in the required information in that book. For the convenience of calculating tax payable in accordance with this Chapter, once the Director-General has given such order, the tax return filer or a person liable to tax shall follow such order.

For the purpose of tax collection:

1.       The Director-General with the approval from the Minister shall have the power to order a person to keep a special book of account and to fill in the required information in such account. Such order shall be published in the Royal Gazette.

2.       The Director-General shall have the power to order the tax return filer or a person liable to tax to keep a financial statement or other accounts or inform any other information and submit to an assessment official together with the filing of tax return in the form prescribed by the Director-General.

5.2 Penalty on tax investigation

Penalties are paid when a taxpayer fails to meet a required obligation of the law. The rates of penalties are percentages of the amount of the shortfall resulting from the failure to meet the obligation (such as 100% or 200% of the tax shortfall amount).

Thailand Revenue officers are empowered to reduce the prescribed rates of penalties, but in order to do so they are required to be provided with a written request stating the reasons why there was no intention to evade taxes, and they are required to consider the taxpayer's co-operation. Penalties are also reduced when a taxpayer files an additional (amended) tax return and pays additional tax voluntarily. But voluntary filings must be done before any notice is issued by the Revenue Department. Once a Revenue officer issues any kind of notice, the reduced rates applying for voluntary filings are no longer available.

In addition, there is surcharge (Interest Charge), is a uniform interest charge for late payment of tax. The rate does not vary in line with “market” interest rates, but is fixed at the rate of 1.5% for each month or part of a month that tax remains unpaid, i.e. 1.5% for each month or part of a month starting from the date the tax was required to be paid until the date it is paid. Unlike for penalties, Thailand Revenue officers are not empowered to reduce surcharge, but the Revenue Code prescribes that the amount of the surcharge shall not exceed the amount of the tax shortfall (i.e. surcharges are not reduced, but are capped).

As below picture is a summary of the penalties and surcharges applying under the three main tax investigation types conducted in Thailand is as follows:

* For Summons Investigations, reduced rates of penalties are possible if a taxpayer files a written request for a reduction of penalties, and the Revenue audit officers consider that the taxpayer had no intention to evade tax and cooperated with them during the investigation.

Thailand

7 Chapter Tax

1 Chapter Basic knowledge

2 Chapter Investment Environment

3 Chapter Incorporation

4 Chapter M&A

5 Chapter Corporate Law

6 Chapter Accounting System

7 Chapter Tax

8 Chapter Labor

9 Chapter Q&A